While the Red Wedding episode in Game of Thrones (S03E09, Rains of Castamere) is happening, our stock market is having its own bloodbath. Been incurring 3-digit to low 4-digit paper losses the past few days. Such a pain to watch really. But this should make me stronger.
And today, as the news says it, was the biggest drop since 2008 dropping by 6.75% to 6,114 levels (from 7,400 just a few weeks ago).
In less than a month’s time, the PSE index has dropped 17% from it’s intra-day peak. Though YTD, PSE is still 5% better off from end of 2012.
And of course, yours truly was NOT spared. I just had my biggest paper loss in my trading life (since 2007). My 5-digit YTD gain was quickly wiped out the past few days, was barely break even last Tuesday, and now I lost 7% more (which is a high 4-digit number for me). The biggest paper loss amount I’ve seen in the past 6 years. Wiser traders would have been liquid prior to these drops. But I’m not. For one I’m not yet such a wise trader. And two, I have longer investment horizon so maybe I’m not a trader in that sense.
But I’m not fazed, daunted or scared. I know better now.
Many analysts and articles have tried to explain why these corrections.
One, foreign funds (hot money) have been pulling out since of the seemingly improved outlook of the US economy. Our neighboring emerging markets were affected as well. Even our PHP.
Two, in spite of very good economic growth number, market is not so convinced since this was triggered by election spending, plus exports have been lower, unemployment rate higher. So are we really growing?
Three, in spite of these corrections, our market remains overvalued compared to neighboring countries given high P/E ratio. If you say this is expected since our economy is growing faster, see second point. Further, there are not much good corporate news to sustain further increase in share price.
And many more, a confluence of lots of factors and market sentiment. There’s no one sole reason.
Or maybe, it’s just the way it is. Every bull run needs to rest, to retrace its steps, especially ours which really has been overspeeding for an extended time.
Got an email from Truly Rich Club and they in fact seem very happy about this. Why? Because given their investment horizon of 20 years, this day drop is just a drop in the bucket. In fact, this can even be a good opportunity to buy more, once the dust settles, as stocks are cheaper.
It’s up to you if you agree. As for me, I have a long investment horizon too. But maybe not 20. So, I’m waiting for the market to stabilize. Not selling, not realizing my paper losses. Just waiting, then I’ll join the sale and load up more.
Don’t catch falling knives.