The outlook for the financial market in 2008 is on the surface quite bleak. I am not an expert on financial matters. I even pay a professional to look after my own money. I am however interested in what the other professionals think.
I watch the money programs on television. All the major international media have an abundance of programs and experts, both resident and guests to tell us what is and what will be.
This plethora of information can be extremely confusing and sometimes contradictory. I choose my programs. The best financial commentator is Neil Cavuto of Fox Television. I don't know if he is wiser that the others but he has a down to earth homely demeanor. He speaks simple English, or perhaps one should say, American. He seems to be humble, unlike some others who shall remain unnamed.
There are various commodities and areas of investment I think should be appraised when considering investments.
1) Oil: The price of oil is at an all time high. China and India will increase their demand. However, Europe, North America and Japan are still the largest consumers of oil. It the winter is mild in the northern hemisphere in the spring the price of oil will fall. How much it will fall by, is not easy to say. One other factor affecting oil is Russia, who is flexing its muscles as an oil producer. Russia wants to be a major power again. There is no telling to what lengths Putin will go to, to make his point. The Middle East will not show signs of stability soon. Iran is not cooperating on the nuclear question. Iran also supports terror in Iraq, Hizbollah in Lebanon and Hamas in Gaza. No change is expected in spite of President Bush's push for peace between Israel and the Palestinians. Instability in Nigeria, Africa's largest producer and a crazy Venezuelan president also play a part in the instability in oil prices.
2) Gold: Is at an all time high. Driven by a weak US $ and low interest rates of the major currencies. Gold does not look like a good investment at the moment. Gold shares in South Africa are also not attractive at present given the high price of gold.
3) Emerging markets: China and India are surging ahead creating giant economies. They are the powerhouses of the future. China's equity market is, I think, overheated, but for the brave, I think Indian equities are tempting. The former Tiger economies of South East Asia are worth investigating. They are more disciplined than before their collapse some years ago.
4) America is still the main center for innovation. Europe is a close second. The good companies in Europe and America remain attractive. I live in Israel, which has more companies listed on the NYSE than any other country other than America itself. We have some very attractive shares listed both in Israel and on the NYSE.
5) Mutual funds: The most attractive are those weighted by pharmaceuticals and innovative technologies in the developed countries.
I repeat, I am not an expert but prices of all equities in the established markets, are low at present. Stocks and mutual funds are down. When your local appliance store or supermarket has a low price, you buy or at least are tempted to buy. We don't always have the money or need more consumer goods.
I'm sure you have all heard the joke, about the wife, who saves her husband a lot of money by buying a lot at sales. When prices are low we buy more. Apply the same logic to the investment markets.
The main reason is that investing in financial markets is not the same as buying two packs of canned food at a reduced price. The money required is more substantial. In the financial markets the logic is, buy low, sell high.
Never spend more than you can afford to lose. Research and research and research more
There is a lot of information available, on television and on the Internet. All the major news networks and specialized channels such as Bloomberg are giving information.
Take some of the equities you like, see how they perform over a period of six months to a year. Keep a record. Test your knowledge. You won't always be right but you will learn.
These are practical tips I have picked up over the years.
My take on the financial markets for 2008 is optimistic. When prices are low, buy.
Two words of caution, don't buy more than you can afford to lose and don't put all your eggs in one basket. This may sound trite, but be careful.
2008 will be a great year for the cautious investor.
Learn more about this author, Henry Tobias.
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