Sunday, July 13, 2008

"Stop Worrying and Learn to Love the Bear!"
...So goes the headline in the Saturday Journal (7/12/08, p B1) from an article with the tickler of "Take it from Graham and Buffett, These Miserable Markets Are a Gift from the Financial Gods." What? Are you insane? All of our 401(k) plans and IRA's and stock picks have tanked at least 20% and this is time to love the bear?...We should hate the bear...right?

...Well, not really, according to the WSJ...and common sense as well...if one can think clearly through the headlines...yes, it is tough times right now, especially if one bought a home in escalating markets with little down payment and a variable rate loan...or you have lost your job...or commute long distances....but if you have a job and can make your rent or house payment OK each is time to put the peddle down on your retirement and savings right now...because what the bear market does is to make stocks inexpensive (read cheap)...and none other than Warren Buffett has said "If a stock (I own) goes down 50%, I'd look forward to it. In fact, I would offer you a significant sum of money if you could give me the opportunity for all of my stocks to go down 50% over the next month."...Why does Buffet think this way? Because he can buy even more shares cheaply before the bounce back in the market...which nearly always comes if you have bought good companies...

Look, people are still going to buy groceries and razors and tires...they may slow down on those purchases but they are still needed....which means if your stock in Kroger or Gillette or Costco has gone down and they are off 10% or 20% or even more from their follows it is not time to sell but consider buying more of these depressed high quality stocks...Gillette still makes good razors and my beard is still growing (white at times...darn!) and I will need to replace my disposable razors in a few weeks as they wear "the people who so far this year have yanked $39 billion out of US stock funds and $6 billion out of exchange traded stock funds, do not understand this. But if you are in your saving and investing years, a bear market is a gift from the financial gods--and the longer it lasts, the better off you will be. Instead of running from the bear, you should embrace him. (WSJ, ibid.) **(caveat--I am not talking about your food and rent money here but disposable income or investment income! I don't want anyone taking food off the table to buy stocks right now!)

...So if you have a "rumbly in your tumbly" over this market...I would ask you (especially you youngsters in your 40's or even younger...) to stay calm and think about the counter-intuitive nature of investing....and that this presents opportunities for be a wise and prudent long-term investor. After all, Warren Buffett is not too shabby of an advice giver on this topic!

No comments: