My share portfolio took a big hit a couple of weeks ago, but nothing compared to what I would have lost if I had not headed for the exit last Tuesday. According to the watch list which I just recreated on my newly reinstalled Bloomberg app on my iPhone, I am now $25,000 better off for having gotten out of the market then, than I would be if I had stayed in today.
Labour Day public holidays are usually slow days for the sharemarket, given that in one guise or another, Victoria, South Australia, Tasmania and the ACT are all on holiday today. But money never sleeps, as Gordon Gecko might say, and the fear which caused a sharp fall on Wall Street on Friday has now firmly gripped the Australian Securities Exchange (to give it its proper name).
Usually, when there is a fall, it happens at opening, and that more or less sets the level for the entire day. Today is different. The sharp fall at opening has been compounded as people get more and more alarmed, and subsequently start panic selling. The ASX 200 is now down almost 6.5% since opening.
If I had stayed in the market, I would be unable to bring myself to watch the carnage, but because I sold out and no longer have skin in the game, I am finding today fascinating.
As I have posted previously, I had no understanding of the stock market in 1987, being a mere 18 year old university student who had very little money and no financial nous beyond knowing that term deposits paid more interest than bank book accounts. The Asian crisis in late 1997 had little impact on me either, as I was buying my 600 shares in the first Telstra float, which was only the second shareholding I ever owned, and I still had a small amount outstanding on the mortgage on my first home. Similarly, when the Dotcom crash happened in early 2000, I had little active interest – whilst I had been growing my modest share portfolio (I got 400 shares in Telstra 2, and do you remember the shareholder discount card you got with your minimum 500 Coles Myer shares?), it was not exactly a big deal. And whilst the GFC in 2008 did hurt, how much hurt can it do you when you are mostly focused on paying off the last portion of your loan and your share portfolio is only $80G? Before I headed for the exit last week, my portfolio had grown to four times that!
So, for the first time ever, I am seriously cashed up at the time of a share market crash, and in the fortunate position of having decided to get out of the market before things turned really ugly. Now I will sit, and watch with great fascination, and wait.
How long will the bear market last, and where will it bottom out? One sharemarket e-letter I read has got a doomsayer who claims share prices are as inflated as they were in 1929, and that a crash could wipe 65% of the wealth from the market. Another chap is predicting a major readjustment of the global financial system, which will involve considerable pain for normal people (the Cyprus crisis of several years ago where bank accounts were frozen is cited as a forerunner of what is to come, except on a global scale).