Vishal Kothari

Wall street is going to be renamed to Fall street.

This is bound to happen if companies keep on tumbling like a pack of cards.

Bear Sterns, Lehman, Merrill Lynch, AIG

These are the ones already affected. And there might be more in line like Goldman Sachs. There is a lot of buying / selling taking place at Wall Street. Not sure if that’s a panic sign.

What to do? Where to invest? Which stock to invest in? - If you ask me, I would still say “Do Nothing”. Some people might say that you can still trade in such a market & make money. That’s possible, but you have to be 200% sure that you are going to earn in the short term.

Be patient & watch the proceedings.

All of you who have been following the stock markets, must not be smiling at this point of time. Markets have tumbled down like a pack of cards. And if that was not enough, there is more to come.

RBI has hiked the CRR by 50 bps, which will be effective in 2 parts. As this has been announced today, markets will be taking a dive again into the sea of blood tomorrow i.e. 25th June 2008.

My advise: Be patient. Stay long term.

Warren Buffett has said one very good line for the people investing in stocks:

Practice Inactivity not hyperactivity

Your broker will advise you to buy & sell everyday, because that is where he will earn from. Eventually, what wins is long term. In the stock markets, an investor should know when to do nothing.

I am writing an excerpt from the book: Stocks, Strategies & Common Sense which I received from VectorVest.

Money goes where money grows. Stock prices go up when corporate earnings go up, and go down when interest rates go up. Stock prices are affected indirectly by inflation rates. Rising inflation rates drive interest rates up which, in turn, suck money out of the stock market and pull stock prices down. In summary:

Stock prices go up when:

1. Corporate earnings go up.
2. Interest rates go down, and
3. Inflation rates go down.

You don’t have to be a scientist to know that now is the period to do nothing.