Gold News

Beaten Down Bargains

If you’d bought the 9/11 bounce, you would’ve waited 23 months to reach break-even...

"THE TIME TO MAKE MONEY in the stock market," reckons Stephen Gandel – yet another senior writer at Money Magazine – is not when things are going gangbusters...”

   (Don’t they have any juniors? Just wondering.)

   "[The time to make money is] when things look as if they're going bust," he advises. "Just ask anyone who invested in beaten-down US stocks after the market sank in the immediate aftermath of 9/11."

   Okay, let's ask him. Because things really do look like they're "going bust" right now, starting at Bear Stearns and winding up there again 10 months later...but not before feeding into the global finance system and finally the very credibility of official currency itself.

   Say, value-loving investor, how did things pan out after you bought beaten-down stocks post-9/11...?

   "Oh gee, what a move!" says our beaten-down buyer.

   "I bought both the S&P and the Nasdaq when the markets re-opened on Sept. 17th, and I made 30% on tech stocks and 12% on broader stocks in less than three months.

   "Trouble is, I didn't know a good thing when I got it, and I was underwater again by July the next year. And thanks to the deeper trend – which was downhill all the way from March of 2000 – I was actually fast on my way to losing one-fifth of my money by the real bottom of mid-Oct. 2002.

   "It took me another seven months on the QQQQ to get back to break-even from there. The S&P didn't get back to its post-9/11 low until August 2003."

   What? Your plucky beaten-down bargains took nearly two years to get straight?
 
   "Hmm, yeah. Kinda got screwed by the trend – which was, like I said, clearly down. Even though the bounce looked a shoo-in. Which it was."

   Take heart, investors everywhere! "Step out of the stock market, even temporarily, and you may miss the whole point of owning stocks," says Janice Revell, another senior writer at CNN's Money Magazine.

   The whole point being, of course, that bear markets in stocks – sparked by mal-investments in credit-fuelled bubbles – take a good deal longer to work out than anyone ever dares guess.

Adrian Ash

Adrian Ash, BullionVault Gold News

Adrian Ash is director of research at BullionVault, the world-leading physical gold, silver and platinum market for private investors online. Formerly head of editorial at London's top publisher of private-investment advice, he was City correspondent for The Daily Reckoning from 2003 to 2008, and he has now been researching and writing daily analysis of precious metals and the wider financial markets for over 20 years. A frequent guest on BBC radio and television, Adrian is regularly quoted by the Financial Times, MarketWatch and many other respected news outlets, and his views from inside the bullion market have been sought by the Economist magazine, CNBC, Bloomberg, Germany's Handelsblatt and FAZ, plus Italy's Il Sole 24 Ore.

See the full archive of Adrian Ash articles on GoldNews.

Please Note: All articles published here are to inform your thinking, not lead it. Only you can decide the best place for your money, and any decision you make will put your money at risk. Information or data included here may have already been overtaken by events – and must be verified elsewhere – should you choose to act on it. Please review our Terms & Conditions for accessing Gold News.

Follow Us

Facebook Youtube Twitter LinkedIn

 

 

Market Fundamentals