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Hype Is Fun, But Real Investing Is Better
08/07/2008 12:00 am EST
US markets loved the Federal Reserve’s actions (or should I say inaction) on Tuesday, leaving the 2% federal funds rate steady. The Dow Jones Industrial Average soared 330 points on the news, assisted by crude oil’s drop below $119 a barrel.
But I don’t expect to see a return to steady market rises just yet. In the US, earnings reports continue to be mixed, housing stats are still in the dumps and the Fed’s steady-as-she-goes strategy is not going to be a long-term fix.
Along with oil prices, commodities in general have been taking a beating—that is, until they staged a quick rally on the announcement that Anglo-Swiss mining giant Xstrata PLC (LSE: XTA.L) bid $10 billion in cash for Anglo-African Lonmin PLC (LSE: LMI.L), the third largest platinum producer in the world.
And although so far, Lonmin has rejected the offer, which it dubbed not high enough, the company’s shares soared 47.7% on the London Stock Exchange and sent platinum prices higher, too.
Combined with some good earnings news from banker BNP Paribas (Paris: BNP.Pa), that was enough to rouse the European bourses. However, for the week, continued mixed earnings signals have kept those markets pretty flat.
Moving on to China, I’m hearing a lot of rumblings of “what’s next after the Olympics”? Some advisors continue to be bullish on the entire market, which I think is riding a dangerous wave, while others take a calmer, more analytical approach and break investing in China down to the sector and company levels.
That makes a lot more sense to me. After all, the foundation of long-term investing is finding undervalued companies that will grow their stock prices as their fortunes expand.
Of course, that doesn’t mean that one sector or company’s momentum won’t bring other, not-so-deserving stocks along with it (as we have seen over and over again, with technology investing, energy, and the Chinese stock bubble). But when that happens, luck is the catchword of the day, and if you play that game, you are bound to eventually to lose when the undeserving fall back to their true values.
So, we’ll pursue the expansion of our global portfolios by finding the best companies with the most potential and that are prospering in markets where they have a competitive edge without insurmountable barriers to their growth.
In this week’s Global Investing, Carlton Delfeld joined us for an interview about some interesting additions to his exchange-traded funds portfolios.
Nick Lanyi found a high-yielding Brazilian company that’s literally “lighting up” the country while paying its investors back in appreciation as well as healthy dividends.
And Timothy Lutts recommended a Chinese steel company that is benefiting from the continued building explosion in that region.
We hope you take some time to enjoy the Olympics this week and we also hope to see you at our San Francisco Money Show, which begins Thursday, August 7th. If you’re in the Bay Area, drop by the San Francisco Marriott from now through Saturday.
If you can’t join us, don’t forget to visit MoneyShow.com daily for Webcasts and videos from the show. We hope to give you the very best ideas that help you invest successfully during these volatile times.
Nancy Zambell edits Global Investing for MoneyShow.com. Her opinions are her own and not necessarily the views of InterShow or MoneyShow.com.
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