With so many companies now trading at cut-price valuations, many of our readers are asking whether it’s time to start buying again. Over the past six weeks many companies are down. And some of them are very high quality indeed. A new reality exists, and one with the same opportunities as 1987.
On October 19 1987, the US Dow Jones Industrial Average plunged in the proper sense of the word. It fell almost 23 per cent in one night. That was before trading halts existed to give investors and traders time to compose themselves. The crash, which reset a corporate debt binge, spread to the rest of the world, and Australia was not immune. Eventually the Australian All Ordinaries index would fall more than 50 per cent.
The reason I share this story is because, with the benefit of hindsight, it is easy to imagine having simply closed one’s eyes and aggressively bought shares at the depths of the crisis. Hindsight is a wonderful thing, as it gives the imagination licence to make the past real.
Today, imagination isn’t required. A new reality exists, and one with the same opportunities as 1987.
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