Thursday, February 16, 2012

Investing: Ignore The Noise

Iran conflict, Greece bailout delay, Moody´s warning. It`s noisy again on the markets. All the noise is almost drowning the relevant fundamental signals. The global economy is healing, but you almost miss it, because of all the noise. Forget the noise!

Every day the markets have to work through a deluge of news.  Physicists label this phenomena "white noise" (wikipedia). It`s like the hissing on radio or TV when you don`t get a clear signal. 

Do you remember that S&P downgraded the U.S. debt  in last August? Since then the Dollar rallied, the U.S. stock market gained around 15%, the interest rates dropped and the whole U.S. economy got stronger. Does anybody recall the Dubai crisis in the spring 2009 or the Iceland financial crisis in 2008? All water under the bridge! It was just noise.

Investors who ignored this noise did well, because the stock markets doubled since the end of the recession in spring 2009. The stock markets are following the upswing of the global economy, which will continue in the coming years because of low interest rates, technological innovations ( drivebycuriosity) and the catch-up race of China and other fast emerging markets. I reckon therefore that all the noise today delivers a buying opportunity for long term investors.

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