OSE: Time to tank up, or to run away?
The equity markets are more volatile than they have been in a while, and only risky capital should be used to increase exposure at this time, but is now the proper time to tank up and wait for an upswing, or should one run towards bonds or bank placements for a while more?
Amongst others the norwegian branch of the Icelandic bank Glitnir offers 6.5 pct nominal interest, and 7 pct nominal interest if willing to bind the capital untill 03.06.2009. This is money covered by the norwegian bank savings fund, so considered close to risk free up till the limit of rougly 400,000 USD per person per bank, that is, if spreading across two banks the limit is 800,000 et cetera. So considereing risk free rate at around 7 pct, and a risk premium of 8-10 percent, one has to expect at least 16-20 pct gains on alternative placements to want to enter.
If we look a bit at the development of the Oslo Stock Exchange (click image for larger size):
OSEBX.I closed at 435.73 today, after what can only be characterized as a couple of hopeless months, bringing us back to march 2007, if looking for another day with close at this level. As such this is well below the 200 day moving average of 461.71, but with a potential support level if trying to make a trend out of the turns in late january and early march of this year
The interesting thing is that norwegian companies still shows some promising earnings potential, so these levels, in theory, should offer some nice P/E ratios for people looking to invest. The obvious question is the investment horizon; One should not invest anything in equities if not willing to stay in the market for at least 5 years, and it is the volatility in the market that over time should pay off.
US shares closing higher with financial and healthcare stocks climbing the most should help tomorrow at least. Falling oil price taking away some pressure from the US market and worse than expected US pending home sales could not stop today’s recovery. SP500 closing the day 1.7 % higher. DJIA up 1.35% with Bank of America the best performing blue chip up 9.30%. Nasdaq100 up 2.40 %.
In the after-market Alcoa (AA) just posted better-than expected 2Q EPS of 66C vs analyst estimates at 65C and at the time of writing the futures are pushing upwards, which should at least make tomorrow an interesting day.
July 8th, 2008 at 21:02
I recently came accross your blog and have been reading along. I thought I would leave my first comment. I dont know what to say except that I have enjoyed reading. Nice blog.
Tim Ramsey