The always-insightful James B. Stewart has some sage advice for investors in his his latest Wall Street Journal column (subscription required). He sums it up like this:
Don't fall prey to sharp swings in market sentiment. Stick to a disciplined, long-term approach.
Don't try to bottom-fish in mortgage and housing markets. It's too early.
Don't chase yield. Junk bonds remain especially precarious, in my view. Short- and medium-term certificates of deposit still offer attractive yields, are government-insured and pose little risk to capital.
A key point that he brings up is the issue of visibility in financial stocks and the mortgage markets. As I've pointed out in previous posts, the earnings of investment banks are very, very difficult to understand right now. The mortgage market is impossible to predict.
To use the words of Donald Rumsfeld, we are dealing with a lot of known unknowns -- there are a lot of things we don't know yet and know that we don't know. There may even be some unknown unknowns -- things we think we know but are wrong about.
James Stewart's good advice on market sentiment swings
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Reader Comments (Page 1 of 1)
1. I need information on NCC. Is it advised to hold a large holding or should I cut back and hold some shares? Are the dividends going to be cut?
Posted at 12:16AM on Oct 25th 2007 by louise
2. I own a large share of NCC..... should I sell to reduce the exposure or hold in hope that it will recover? Is a dividend cut eminent? If so, will it be crucial?
Posted at 12:26AM on Oct 25th 2007 by louise