«At the moment, investors in the stock market should be cautious, but that does not mean they should stop being active, as there are numerous very attractive investment opportunities they should take advantage of.».
A. Redondo and J. Zuloaga, Expansion Sunday 27 January 2008, A guide to weathering the stock market storm:
«After several years of enjoying a Mediterranean climate, global stock markets are currently facing a veritable storm. The clearest example of this shift is reflected in the last trading week, when the subprime crisis and fears of a US recession triggered the biggest rises and falls in the Ibex’s history within just three days. Many investors have been shipwrecked by the new storms on the trading floor. Probably because they were unaware of the lifeline offered by derivative products.» (…) «But, as well as sheltering from the storm, investors can also capitalise on it. To this end, one option is to opt for trading in futures.» (…) «In addition to these products, financial institutions are turning to new tools such as contracts for difference (CFDs), which have been hugely successful in the UK, or certificates, which have proved a hit in markets such as Germany and Italy.» (…) «Meanwhile, certificates also broaden the range of possibilities, although their tax treatment makes them difficult to market. However, some institutions, such as UBS, Deutsche Bank and, to a lesser extent, Société Générale, have decided to take their first steps into a product that is listed on the stock exchange and is structured around one or more indices, a basket of shares or a sector, allowing investors to bet on falling prices, with the aim of multiplying gains or reducing losses. They are ideal for non-directional markets, says Miguel Muñoz of X-Markets, Deutsche Bank’s certificates division.»
Bitchbag, Saturday 26 January 2008, comment on our article Coitus interruptus:
«We’ll see how this all turns out, because at the moment both sides are being torn apart – the bulls and the bears at the same time. The only ones coming out unscathed for now are those watching the bullfight from the sidelines.»
Cretan, Wednesday 23 January 2008, in his article Trichet is standing firm, and the market is paying the price:
«The market remains so turbulent that the best thing to do is to stay on the sidelines and hope that negative news doesn’t keep piling up. I won’t tire (for the time being) of continuing to recommend the same thing: a great deal of caution, and the further away from the markets, the better.»
JMDV, Thursday 24 January 2008, in his article Jauja again:
«What I’m trying to do is call for caution and remind you that all the doubts that existed on Monday (for those who actually believed them) still hold true today, Thursday. Nothing has changed except Mr Market’s mood. Let us therefore take this opportunity to fill our portfolios with good companies at good prices…» (…) «Remember that the aim of any investor (whether technical, fundamental, long-term or short-term) is to grow their wealth over the years. If we fill our portfolios with high-risk shares, blinded by buying frenzy, we run the risk of never achieving our goals.»
In this very post by JMDV, we find comments – a gem like this one from The Omega Man (one of my favourite commenters; sorry, but I don’t know where to link to you):
«Pasta and fundamentalisms:’
Value investors (myself included, at least) aren’t value investors for aesthetic, philosophical or religious reasons. We are value investors because we want to make as much money as possible, and we have at least 5–10 years to reap the rewards. And if you spend enough time reading about the When looking at this topic – which investors have achieved the highest annual returns, and so on – you quickly realise that the most effective way to do so is through value investing. The fact is, if you’re not in a hurry, making money on the stock market is incredibly simple: 1. Calculate the intrinsic value, as conservatively as possible, of a number of companies (and JM explains this to us every now and then) (how to do it). 2. Buy, when they come within reach, at prices well below that intrinsic value (50-40%). 3. Sell when the share price approaches its intrinsic value. And that’s that. There’s nothing else to do. Are prices falling? Well, buy more if you’ve got the money, and if not, just be patient and stay calm. Can’t find any? Companies to buy? Well, just keep your cash reserves up and carry on looking. Anything other than those three points above is just noise, and the mind playing tricks on us by looking for patterns in »the turmoil on the stock market."
We could give many other examples, but we think these will be enough to give you food for thought:
In the first instalment, we have comments from Gonzalo Rengifo (Managing Director, Pictet Spain, Portugal and Latin America), and the article in *Expansión* features contributions from Miguel Muñoz (Deutsche Bank’s certificates division), Miriam Pérez-Camino (Head of Listed Products at BNP) and Francisco López (derivatives expert at Gaesco Bolsa), amongst others. They are nothing more than Financos are on the hunt for Inversópatas. (We warned about this back in June 2007, but they’re still as ravenous as ever)
In addition, we have included Putabolsa, Kretan, JMDV and The Omega Man in a second group. I think we would all agree that this selection has a great deal of quality (I should point out that, technically speaking, I consider these bloggers to be at least as knowledgeable as the leading ones) whilst diversity. It is clear that within this second group we might find radically different views on investing in the markets; however, given the current situation, their views converge on many points, diverging significantly from the talking points put forward in commentaries by Bloomberg and Expansión.
What differences are there between these first two examples and the rest of the bloggers and authors whom we find much more relatable and admirable? Independence. Indeed, none of our dear colleagues and neighbours has any ulterior motive beyond offering honest advice out of a purely educational or philanthropic desire. Whereas all those quoted in Bloomberg and Expansión spout a line on which the revenues of the companies paying their salaries depend, and which will potentially enable them, over time, to climb the corporate ladder. That is all there is to it. It is not a question of some being clever and others foolish (there may be a few, but I doubt they are in the latter group), nor is it that their view of the markets and risk is incomplete or distorted. I repeat, the essential difference is Independence.
If we extend this phenomenon to other areas of wealth management – and not just to the markets – we will gain a better understanding of what counselling entails. If we also apply the quintessence of the networking With counselling, we will be very close to what a multi-family office is. The 
The cost of this independence will be more than offset by the savings on fees and the avoidance of unnecessary risks, not to mention the potential losses from unsuccessful investments.
My respect and admiration for the second group mentioned, and my deepest contempt for the first. For at times such as these, I hold them particularly responsible for the catastrophic damage caused – and likely to be caused – to the assets of investors who are unaware of the grave dangers posed by the «lifelines» offered to them by their derivative products. Proposing investments to clients who lack the necessary knowledge to understand or accept the risks involved is not only unethical. Even though their clients’ operating accounts meet the targets set, and unfortunately their superiors reward them for this, even in times of prosperity, it is negligible.
How much longer will the average investor continue to place blind trust in expert analysts on the payroll of companies selling financial products? It’s not that difficult to work out Who’s Who in the City if we look at the economic independence of their slogans.