Tuesday, September 30, 2008

Just Say No to Fear? 

Via Greg Mankiw:

Warren Buffett has said, "you should get greedy when others are fearful and fearful when others are greedy." If he is right, [and the information Greg links to strongly supports that contention] then this is the time to get greedy. There is no doubt that most everyone else is fearful.
There is a strong argument to be made that during a crisis of market confidence, the most patriotic thing the average American can do is register a vote of confidence in the U.S. economy by doing what our own Congress just signally failed to do: investing - intelligently and prudently - in the future of our own economy at a time when prices are artificially low and the value of basically sound investments is virtually sure to rise from where it is today.

The question that interests me is, what would you do if you had a million dollars to play with today and you were a patriotic American? I would like to think such people still exist, but maybe I'm just smoking crack again.

At any rate, it promises to be a very interesting month.


By Blogger Dawnfire82, at Tue Sep 30, 01:29:00 PM:

I would pounce on purchasing a decent home. To live in, not as an investment.

If I had enough I might get one or two others to rent out, since I've got a million dollars and all. Depends on local property taxes and real estate details, I guess.

My grandfather (the grouchy one I invoked the other day who was born during the Depression) did this with his life... instead of investing in stocks and such he bought land and houses, and now has a comfortable retirement because of the constant influx of rent moneys.

Don't know what patriotism has to do with it, though. Except insofar as operating intelligently within the boundaries of capitalism helps drive our society forward.  

By Anonymous Anonymous, at Tue Sep 30, 01:56:00 PM:


I think that your instincts are correct. However, for me at least, I feel like I am sitting on the edge of precipice at night I cannot tell at this moment how far it is to the bottom. When "morning" comes and we can see more clearly, it will be the correct moment to act accordingly. I don't know when it will be morning so, at this moment, I don't know how to "act accordingly". I have been in business for 38 years. I always expected that I would have it figured out by now. Guess not.  

By Blogger Cassandra, at Tue Sep 30, 02:15:00 PM:

Don't know what patriotism has to do with it, though. Except insofar as operating intelligently within the boundaries of capitalism helps drive our society forward.

Well, I was thinking last week that there is a natural tension between the instinct for self preservation (sell short and run for safe investments) and the 'moral response' (do I have any duty to my fellow citizens? i.e., not to panic and push the system to the brink - especially if I can figure out a way to force a win-win result?).

Hence, this post. But then I always have been a Pollyanna.  

By Blogger Cassandra, at Tue Sep 30, 02:16:00 PM:

re: real estate, I agree Dawnfire. In fact, we've been looking harder since this started.  

By Anonymous Anonymous, at Tue Sep 30, 02:26:00 PM:


I realize this isnt a money or stock advice website, but you asked what to do with $1M.

Real Estate is definately localized, depending on where you live housing could be a buy or a trap...

So, for a best guess on where i would put my money in a generic macro level way of thinking, ...IMO Boeing has been over sold and is now a buy. Just my two cents.

the Colonel.  

By Blogger Georg Felis, at Tue Sep 30, 05:32:00 PM:

I think he also said (paraphrased) “The market is capable of being irrational longer than you are capable of maintaining liquidity” Translated: Betting on the markets returning to sanity quickly is a way to become poor quickly.  

By Blogger Cassandra, at Tue Sep 30, 05:51:00 PM:

“The market is capable of being irrational longer than you are capable of maintaining liquidity”

Hmmm... wasn't that the argument the President made the other night (the government is the only entity with the patience to wait for the market to settle, or something to that effect)?  

By Blogger Simon Kenton, at Tue Sep 30, 10:24:00 PM:

I don't have a million for the market, but if we postulate that, or even just posit what I do have, I am dollar-cost-averaging it into dividend-paying stocks and mutual funds. Because I have a sort of job (managing real estate) I don't need the income and am reinvesting it along with the purchases. Eventually we boomers will realize you cannot make it on capital gains; you have to have that monthly or quarterly cash flow. At that point my whining and narcissistic cohort will bid up the stocks I have been buying for several years now, providing the capital gains (to me, if not to them) as well. Dividends tend to put a floor under the price of the stock that pays them; a stock that doesn't pay them can have its price halved infinitely (pace Zeno). That monthly or quarterly reinvestment also provides calmness; you can tell yourself that when prices crater, it just means more shares in the next reinvestment.

It is true that market irrationality can outlast you, but it is also historically/statistically true that if you wait to enter the market until it has been down for at least 2 years continuously, your chance of protracted losses is minimized.

The Medicis pre-Buffeted Buffet: Buy when the blood is running in the streets.  

By Blogger Dan Kauffman, at Tue Sep 30, 10:44:00 PM:

I would look for good solid companies with assets and good profit to sales ratos, ie a good investment in any market, whose only fault at present is they are caught up in the general market drive and buy their stock at bargain basement prices.

I remember the Stock dive in the late 80s. The next morning I saw a Stock that had dropped from $20/share to $4/share, BUT it had just issued a #2.78 dividend.

I was broke ;-(((

I watched blocks of that stock for months being trickled out into the market in the 19-20 dollar range, someone did very well with that stock IMO  

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