Time To Get Bullish?

11/05/2009 by info.

Almost unnoticed the FSE100 the share price index of the UK’s largest companies has increased by nearly a third since mid March 2009.

What does this mean in layman’s language, well it means that the value of these companies has increased by nearly a third in a couple of months. Great news if you or your financial advisor recognised the bottom of the market, this however indicates that the worst of the recession is over for these companies.

An increase in the share price means an increase in the value of the company, which indicates that the profitability of that company is increasing.

I would doubt whether the value of these companies were actually that low as markets tend to overshoot as the masses overreact to circumstances.

At the first sign of swine flu the share price of British Airways fell by 20%, I tweeted at the time that surely the value of the company has not decreased by that figure, what has happened? Well the share price has recovered to its previous level after the fear fell away.

The property market in the UK is about at its long-term real house price trend value; however expect the value of property to fall further as the market overshoots due to continued fear. By Winter 2009 you will see real property bargains.

For the prospective small business owner what does it mean? Well now is your chance to make money by buying a business before the masses recognise that the bottom of the recession has been reached as in the few months time by the time that your purchase has completed the recession will be over and you will be best placed to start making money.

The purpose of this is to show that you can take advantage of other people’s overreaction or as Warren Buffett has been quoted as saying, “Be fearful when others are greedy and greedy when others are fearful”

Perhaps now is the best time to be greedy before others do.

Posted in Buyers, The Economy, General | No Comments »