China dropped 7% early in the day, which caused their market to close for a day. It’s a new thing they are trying this year. I believe tomorrow might repeat, we’ll see, if the government does not step in to rescue its stockmarket. Why didn’t they do so today I don’t know but maybe they are still deliberating and looking at all possible options. I mentioned sometime before that it’s a very expensive exercise to prop up the market but my guess is –from the government’s perspective it is even more expensive – politically – to let the market fall. I did read people are puzzled – why devalue the currency at the same time and shock the market? We do have to understand that Chinese economy is export-oriented which employs massive amount of people and their factories would make cheaper goods for buyers, could win back market share of manufactured goods (from the Euro area whose manufacturing is helped by cheaper Euro as I mentioned yesterday) – so that’s the more longer-lasting and desired effect for the economy.
Anyway, the trader’s way is to “follow the market”, and this downtrend may have a few more days to go ,,, or not! Yeah, one can’t be too sure predicting which way the market will go, it is very volatile. Anyway, I decided to do a covered call / bearish strategy last night on AAPL, when I saw that it had recovered from the early plunge, and then started to move down. After a while the market ran against me – the loss already at 2x my Initial Risk, but I was thinking with the long day ahead and selling pressure still strong, the stock is likely to decline again by lunchtime, which it did. There was that FOMC Minutes Release at the afternoon too, which invites a lot of volatility. So the day ended with the Covered Call being in profit just a little bit. I am projecting that with the time value expiring I can still buy it back cheaper today (and even cheaper with the China plunge sure to make stocks dive again at open).
I’ve been talking about bargain-hunting and I hope investors have exercised due care in their buying decisions. I haven’t bought anything to ride price recovery yet. I thought I’d wait until the corporate reporting has rolled in with good profits that will cheer up investors and lighten up the sentiment. I can see valuations which are really attractive — some already at single digits. Investors and the media will certainly talk about “oversold” conditions again in no time. So there is no hurry, you can keep looking for the best stock for you to invest in. You don’t pick up the first bargains you see in the shops don’t you — you go far and wide to inspect the merchandise. You do your research. If you think there isn’t a lot of competition for something you want, you can afford to wait some more as it could go cheaper. Like you can pick some of the high-dividend paying ones that will be growing also. Truth be told, the best bargains are those that nobody wants! Like when it feels utterly hopeless (another investing gem of Warren Buffett – be bold when others are fearful).
Since I mentioned my shoe-buying bargain-hunting yesterday, I tried again my super-bargain purchases – light pink pumps that I picked up at $9 and retails over $100, that I have only worn once so far — but I walked on it good — that a star is born! hahaha