We shall go or we should stay… The shares dilemma

One of the most important dilemmas, in particular for new investors, is when to get in or leave the market. There are a lot of theories, but I’ll concentrate in the ones I found more interesting.

When to enter:

One position – old one – says that whenever the values are dropping, is a good time to buy; and this is true. The point is WHEN can you buy, immediately after the slowdown starts? You have to wait to see if the value keeps falling as time passes? Do I have to make a research about previous movements of this paper I’m interested on?

As you can see, is not that easy!

I recommend taking a careful look to see how that paper has been moving during the past, let’s say, 12 months to see if its actual value is close to the “roof” or to the “floor” (highest or lowest value). Is there any rumor that might affect this share? (for example takeovers, mergers, something affecting the industry – locally or around the world). It’s a “sale” that you can take advantage of? Did you check the company’s balance or any public information about it?

A second position states that is better to get in ones the paper made the turn-over, this means its value is starting to grow because then you’ll probably be able to “ride on a good wave”. Again the previous analysis has to be done in here too

When to leave:

The old one says: As far as you gain a good number you better leave it because a lot of people like you are making the same analysis. The point is: what is a good number 2, 15, 100%? The answer varies according with your investment decision. A good idea is to leave when you’ve reached the % you assigned to be obtained by this paper. But, sometimes being too ambitious can make you lose a lot…

Other ones think about leaving the paper when it starts to drop, it’s also a good point, but your looses may be higher than in the previous case if for example the company’s share experiences a big fall in a single day and then you try to guess what can happen on the following day, plus a lot of people will be doing the same than you do: SELL so the value falls even more!

As I said on the entering point, get all the information you can before making your move. Of course, a bit of luck is always welcome!

Till my next post!

Prof. Lic. Fernando Julio Silva, MSc.
SEPTEMBER 2008

Where do investors and savers go when the economy turns unstable?

A couple of weeks ago I’ve read and opinion written in my Country that explained that due to uncertainty peoples’ preference was moving into the acquisition of perdurable goods such as properties, cars, etc.

I don’t agree with this, I still think that one of the most secure points to put your money under a big storm like the actual one is the Stock Market, I believe that – and of course it depends on when you need your money back in cash – if your goal is not to lose money or its value, you have time to wait – lets talk at least about the medium term – the best point is to buy shares of well-known companies.

You can predict that those companies won’t disappear over time (in particular the ones that are dedicated to the production of goods) and that their value will be recovered over time. Their fluctuation will be according to the ones of the economy and when this one turns over so will do the shares' values.

Even in the big collapse that well-known banks are suffering right now they inform that the shareholders’ funds are safe. If this is true, only the time will give the answer…

To conclude, for me shares are still the best “captain to manage a big storm”

See you on my next post!

Prof. Lic. Fernando Julio Silva, MSc.
SEPTEMBER 2008

Economic European situation and the value of the Euro in connection with the Argentinean Currency

From ends of 2º Trim. they are observed in Europe inflationary nature problems as likewise certain possibilities to enter in recession (countries like Denmark, Spain, England, France and Germany are in at least one of these two situations).

On the other hand USA sees a similar situation: inflation and recession.

Europe sees to be in danger the previously expected growth to the prospective rate.

In the specific topic of the value Argentinean Peso - Euro we see that the changes for the past year were:

=> 4.30 $/Euro: Relationship in August 2007
=> 4.50 to 4.70 $ / Euro: Flotation range among Nov '07 and March'08
=> 5.10 $/Euro: Highest level reached in May'08
=> 4.40 to 4.50 $ / Euro: Fall until ends Julio'08
=> 4.70 to 4.36 $ / Euro: Soft slope that takes place among August '08 and the day 03/09/2008

Some international analysts speak about a value to Dec '08 of + /- 4.88 $ / Euro (this derived starting from a relationship 1.60 U$ / Euro)

I believe that it is not an easy year as to make a prediction about values to futures, on one hand the rocking price of the barrel of petrol makes that the economies ascend and lower in function of the same one.

If we observe the situation in Argentina, the thing doesn't go better, to the problem with the farmers is added the great increase of the prices that makes that the inflation level in the Country gets to a worrying point (and the lacks of coincidences between the private readings and the proportionate ones by the official organism: INDEC makes that this uncertainty in the readings is developed). The maintenance on the part of the government of the value of the dollar (which falls at international level) since tries to stay a relationship of favorable (exports / imports) exchange. The possible payment to the Club of Paris announced in these last days gives a favorable small breeze to the government for the recognition that this measure has had from certain European governments.

As they come, all these they are variable to keep in mind.

In summary, I believe that - being this nothing else that my personal opinion - the relationship Euro- Arg. Peso should not vary in excess in the next months. An appreciation of the Euro of + /- 10% is feasible and the negative reading - if it was given - I don't expect it to be bigger to 0.25%; this would give us values compared with the one from yesterday (03/Sept./2008) (4.36 $ / Euro) from 4.796 $ / Euro to 4.251 $ / Euro

See you on my next post!

Prof. Lic. Fernando Julio Silva, MSc.
SEPTEMBER 2008