'Uncertainty' offers opportunity

‘Buy when the cannons are firing and sell when the trumpets are blowing’, Nathan Rothschild apparently said in 1810 as the Napoleonic Wars rumbled on and, while there haven’t been too many cannons fired lately, there are plenty of bombs being lobbed by the world’s political elite (and not so elite).

In the UK, Thursday’s ‘Brexit’ referendum has got Desperate Dave and Bumbling Boris chucking pies at each other just as they presumably did many years ago at Bullingdon Club dinners; in the US we have the remote (surely?) possibility of a Trump presidency; and on our own shores we apparently have another election, although everyone’s too tired of politicians to listen to a word any of them are saying.

It all makes for a lot of what market commentators call ‘uncertainty’. On a good day, they’ll go on to list some of the things we have to be uncertain about: the isolationist potential of a Trump presidency; the destabilizing effect of the UK leaving the EU, potentially prompting others to do likewise; the risk of all this exacerbating the low growth around the world.

The truth is, though, that most of the risks we face today haven’t yet been thought of. To prove this point you only have to consider that the merest mention of a Trump presidency a year ago might have been enough to get you committed. A year before Lehman Brothers imploded at the peak of the global financial crisis, the US Federal Reserve’s cash rate was at 5.25% and the Dow Jones was hitting record highs.

All of which is to say that the future is always uncertain, and never more so than at any other time; it just sometimes seems that way. And when the media gets its teeth into a few scare stories, it can make it seem a lot that way.

The overall uncertainty is what gives shares their edge over other investment types. Some capital can’t even consider shares – because it’s needed to settle bills in the short term – but plenty more tends to consider them when things seem OK, only to run a mile when the going gets a little rough. Needless to say, these are the times when you need to hang tight and look around for bargains.

Of course some of the risks may eventuate, but if you pick a diversified portfolio of stocks with a decent margin of safety and exercise patience, you should come out OK. Right now there are plenty of opportunities on our Buy List – including some of the blue chips mentioned in our recent special report on Australia’s 10 best businesses.

We’re also on the lookout for more. Flight Centre (ASX:FLT), for example, is closing in on our Buy price and the big banks – CBA (ASX:CBA), Westpac (ASX:WBC), NAB (ASX:NAB) and ANZ (ASX:ANZ) – are as cheap as they’ve been for several years. Our members will be the first to know if and when we fire our cannons.

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