OK this will be my post-Valentines blog entry because there were holidays in the US and China. I’ve decided that somehow the last few days developments in the finance world prove that “love makes the world go round” and for all the “doomsday” predictions — there is way out and up. I am talking about :
— Oil producers now talking amongst themselves (as opposed to not wanting to talk and leave the world oversupplied and credit-markets spooked, plus mention oil-producing governments and their citizens enduring budget cuts)
— China coming up with policy stimulating the economy without aggressive rate cuts (which avoids problems like more credit risks and capital outflows due to weakening currency). People’s Bank of China (PBOC) chair had also broken his silence, so you’d think they’ve figured something — that the yuan should be stabilized (article here). The major policy – a 5-year plan comes out in March.
— Central Banks — in “stimulus” mode. There’s Bank of Japan stimulating their economy surprisingly fast with “negative interest rates” — a novel idea which aims to have banks lend money instead of keeping it with the central bank for which they earn interest — meaning they are willing to do whatever it takes to help growth. European Central Bank also hinting at more stimulus in March, and US Federal Reserve just releasing its Minutes of the Meeting being wary of the softening global growth outlook so they are at least considering holding their fire with the interest rates — as I’ve said they would last year, given the bad effect of a strong dollar and trade with their neighbors China and Mexico — in this post “Bear Months”
Granting, these are all new developments and not yet proven to solve problems, but hey – that’s certainly a lot more positive than the start of the year when the investment scares started and pushed the stockmarket into bear territory and nobody wants to do anything.
Sure there is still negative sentiment in the market. I still see a lot of stories about the credit issues of debt-ridden commodity companies. That’s why we have to be invested in the right companies. Above 3% dividend yield is worth investing on. Steer clear of commodities companies though – those dividends may well be cut with the poor revenues. I’d stick to a careful selection of undervalued, dividend-paying stocks of strong sectors.
Remember money loves company, it will go to where it is treated well.
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More about the topics here.