The markets always pray for a prophet to guide them. ‘If only we had this seminal mind that takes us through everything!’ is the most basic hope of lay investors. This explains the rationale of having market gurus. Never mind, there is no market prophet. We still have a Buffett or a Jhunjhunwala, homegrown and wise. But, the stupidity of the human mind makes it hang on to its market prophets only in the good times and not when the chips are down. When the markets are down, the Prophets don’t click. The art of investing intelligently is about listening to your own mind. Be your own prophet and listen to your common sense. Don’t crowd yourself with greed and the herd mindset. If everybody is doing the same thing, the truth is nobody is thinking. Walk away from the hottest asset classes of 2012 before it is too late. Or else, you may face the prophecy of extreme pain.
As markets consolidate, so must your investment book.
Inflation in the prices of hard assets will eventually show up in business earnings. If land and building become very expensive, then we will stop putting up business assets and wait for business demand to grow. By the time demand grows, it may be too late to have assets in place to satisfy business demand entirely. This results in earnings growing faster when demand returns. Investors can partake in this recovery by simply avoiding buying assets like land and building directly and choosing businesses as a proxy. If you are positive on these asset prices holding up, then the most sensible thing would be to invest in businesses. There can’t be a better case for equity that the bullish fever in real estate assets. A bull market inevitably results from the businesses becoming under-invested.
Review & reorganize now. Results will follow you.