Volatility and Dangerous Opportunities

While the votes were counted for the US Presidential Elections, the singapore stock market experienced frightening declines. Banks stocks were sold down heavily, and gold and companies dealing with the precious commodity got bid up a little too quickly.

The obvious opportunity is to buy gold or these companies as a hedge against a downturn. I refuse to subscript to this theory because of some well-known arguments, such as:
1) You can't analyze the value of gold. It is entirely speculative.
2) Even if the value of gold is ascertainable, you are not paid to wait (no dividends) while the market corrects itself.
3) Prices of gold mining company stocks move along with these gold prices and even if they are deem cheap by book value or discounted cash flow, it is not worth it due to (2), as these companies usually will not pay a dividend.

That said, it came as a shock to me that equities "recovered" (I loathe to use this term because only stock prices moved, companies function normally during this event), the prices of gold plunged very quickly and so was the prices for these gold-related companies. I do have a friend right now which is stuck with a gold mining stock. Personally, I think the fair value of this company is 0.510, and that is the case right now. However, I subscript to view (3) and (2) and think that Singtel is a better bet.

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I am blessed to be consuming bit and pieces of wisdom from John Templeton's book, Investing the Templeton Way. Hopefully I will finish the book and write a review of it.