The art of investing, in my view, is to sense where the big money is going toward. I lost huge during the last few years by buying small stocks because I thought those are value.
But I was wrong. The big money was not going toward small "value" stocks. Sun also mentioned several times already. This is a big cap stock market. Retirment money goes to mutual funds who under the pressure of outperforming the indexes have to selectively buy big stocks in the SP500 indexes; people's worry about liquidity and track records of the management also made the big boys more attractively; last but not theleast, a lot of foreign money flowing into the U.S. market - those people turn to buy well known companies such as MSFT, INTC, GE, and KO. They are not interested in and not knowing of the companies that I have been buying. So the result was obvious, while the market went up 30% a year (up until recently), I was losing 30% per year. With most losses occurred during the last 12 months.
What now ? I sense a money flowing out of the U.S. market. The firming up of the Japanese Yen during the last few days is one good indication. People start to realize that the U.S. economy is not going to last forever and the trouble President Clinton gets into is making the situation worse. He is now at the messy of the Republicans and his political enemies (K. Star being a spokesman), and only the Lord knows what's going to happen to him and the consequenses of that to the country's stock market.
I feel one part of the big money - the foreign money is going out. Those stmart people who borrowed Yen @ 2% interest rate in Japan and then deposit them into U.S. at higher interest or return from the stock market are now repatrioting that money back to Japan. Thus the loss of big cap stocks. The big caps might have to underperform the general market in the forseable future. This might continue for a while until everybody realize the big stocks are value too. But it is not happening yet. Russel 2000 is as bad as SP500 or Dow Jones Industries.
At the same time, however, retirement money does continue to pull into the market and that does not seem to stop soon. As long as that money is available, even temperarily goes into the money market funds or bond funds, it will eventually land in the stock market.
So I am wondering about the combined effects of the decrease of foreign money inflow vs the increase from U.S. savings, which will outweigh and what the stock market will look like in the forseable future ? In a summary, where the big money is going now ? Out or In?
Besides, are my views correct ? At least this is what I feel I have learned from my painful losses. Thanks for all upcoming comments. |
