Thursday, October 9, 2008

Volatility Index ( Also Called Fear Index)

The "Fear" Index is at an all time high now. At 57.53. Do you notice that the peaks of this index are around crisis periods? Remember the Asian Financial Crisis, The Sar Period e.t.c.
The "Fear" Index is now the highest ever! It's unprecedented.
Nevertheless, "Be greedy when others are fearful, and be fearful when others are greedy".
- Sage of Omaha ( Warren Buffet)
SGDividends recommend investors to BUY now. Lots of it. Go underweight on CASH!

Yesterday, central banks around the world did a coordinated interest rate cut, another unprecedented event!
Based on the hypothetical stock portfolios on the right hand side ( created on 08 Oct 2008), the portfolios that reacted well or not so well to this piece of news:
1)Portfolio consisting of the Highest Market Capitalisation made (Net gain of $12870 (+ 3.22%))
2)Next, portfolio consisting of the highest number of analyst buy calls. (Net gain of $2375 (+0.59%))
3)Next, portfolio consisting of the lowest price to book ratio counters ( Net loss of $2677 ( - 0.69%))
4)Last, portfolio consisting of the lowest price to earning ratio counters. (Net loss of $2314.11 (-0.58%))
Investing Idea:During times of crisis, counters with large market capitalisation reacts most to "good" news. Therefore, buy Big Caps in anticipation of Good News in times of crisis.
Lets wait and see in the long run, which strategy wins!

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