Friday, December 26, 2008

Nervous Investors Helping My Bottom-Line

Interesting story here of folks pulling their money out of equity funds and stashing it in cash and bonds. For some, this makes sense, especially those nearing retirement or some other event in which capital conservation is the key objective. Aside from that? They are unwise--they bought high and are selling low. This will give them the unique opportunity of sitting on less cash and then buying BACK in when the market rises at higher prices--a double blow. Me? I'm buying. Aggressive Growth. Emerging Markets. Small Cap, Large Cap, I'm spending like a drunken Sailor picking up the bargains that nervous folks are leaving for me. Greenspan once talked about "irrational exuberance" when describing the tech bubble; I think we're seeing some "irrational negativity" about the long-term prospects of our economy. I talked with my friend at Postcards the other night, and he sits on the gloomy side of the tracks. My argument is this: the economy has over-corrected. Yes, a Dow at 14000 was overvalued. But does anyone really believe that the average business in this country is over 40% less valuable than it was a year and a half ago? I don't. I think we're working our way through a very tough time and a new normal will soon be established....and it will be higher than 8500. Wise investors will soon return to the market in search of quality companies selling things the world needs.

1 comment:

Goldwater's Ghost said...

It's not that I necessarily sit on the gloomy side of the tracks, I just don't share your rosy rebound prediction by this time next year.

We share similar investing strategies - at my age, I'd be a fool not to. Will the Dow continue to hemorrhage? No. But I think we've come into a period where it's likely to continue in a holding pattern until the global economy clears the phlegm from its system.

Will this happen by this time next year? No. It may begin to happen for other economies, but not for ours. Not yet.

But then again, what the hell do I know?

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