TINY MINDS

Archive for October, 2008

Part of what I do for a living involves investing in stocks and bonds.

Over the last few weeks, and months, I’ve noticed that markets can be mindless. Long a believer in relatively efficient markets, I’m becoming more and more convinced that they would be, if they weren’t peopled by idiots. I do believe, however, that in the long term (ie not a 24 hour news cycle, or a month, or a quarter, or a year, but rather over actual “long terms” of say 5-10 years) I think that markets are reflective of the values being traded.

At the current moment, however, the Mr. Market is being an ass.

The economy cannot possibly be as bad as the main stream media is making out, obviously for the benefit of their anointed candidate. This is a cycle that’s gone on for a long time; in my lifetime, there has been an alleged recession each time that a Republican (after Reagan) has been running for office. Bush I’s recession was illusory; Bush II’s recession in 2004 was also illusory. I believe that we are not in a recession now, although, due to the recent market crash and manipulated oil price shock, we may have a shallow one on our hands over the next couple of quarters. But it will be shallow, and short-lived.

As hedge-funds and massively leveraged investors were forced to unwind their portfolios due to the credit crisis caused by the sub-prime meltdown of Fannie Mae and Freddie Mac, as well as the Federal Reserve failing to “rescue” Lehman Brothers (which in my opinion will go down in history as the biggest dipshit move the Fed ever made, bar none), we are seeing retail investors start (too late) getting into the selling party.

Folks, Potter’s not selling, he’s buying. A recent op-ed piece by Warren Buffett referenced in this blog earlier tells you all you need to know: Valuations of companies are at an insane level — they are on sale to a degree not seen since 1974. If you have any kind of cash, you should do like Buffett, and buy, buy, buy.

If you have a portfolio, make sure it’s rebalanced, and then hang on for dear life. If you sell out, you are locking in your losses. Let others do that. Every single time there’s been a market crash, people with cash, and people who held on (assuming they were diversified into a spectrum of companies and bonds) were rewarded. Every single time. EVERY SINGLE TIME.

One last thought before I head for dinner. Think of it this way:

Let’s say you own a house. You’re planning on living in that house for a long time. Let’s also say that the real estate market is down, like it was in California in the 90′s. Or now, throughout the nation.

You bought your house for $300,000. You look on Zillow, you read the “comps”. According to Mr. Market, your house is now worth $200,000. Would you sell it now, seeing that it’s declined in value by a third?

Of course you wouldn’t.

Because you know that you’re going to be living in your house for a long time. And you also know that real estate prices in the long term always go up. Especially in inflationary times.

And just as you wouldn’t sell your house just because prices are lower at the moment, neither should you sell out of your investments. You don’t need to move out of your “investment house” — so don’t. Hang on, ignore the day to day news, and just bloody wait.

Let the morons sell to Potter.

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Joe Biden:

“It will not be six months before the world tests Barack Obama like they did John Kennedy. The world is looking. We’re about to elect a brilliant 47-year-old senator president of the United States of America. Remember I said it standing here if you don’t remember anything else I said. Watch, we’re gonna have an international crisis, a generated crisis, to test the mettle of this guy.”

“I can give you at least four or five scenarios from where it might originate,” Biden said to Emerald City supporters, mentioning the Middle East and Russia as possibilities. “And he’s gonna need help. And the kind of help he’s gonna need is, he’s gonna need you – not financially to help him – we’re gonna need you to use your influence, your influence within the community, to stand with him. Because it’s not gonna be apparent initially, it’s not gonna be apparent that we’re right.”

I wonder how many thousands will die initially, and then, once he fails utterly to respond in a way that’s “right”, apparently or otherwise, how many more will perish?

(Of course, McCain is the erratic one, right?)

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Well, the Sage has spoken. Perhaps Sage is the wrong term; perhaps we should start calling him “King of the Pumpers” but what the heck.

At least you’re buying stocks. Of course, you get special deals to buy yours en masse; you can increase a stock’s price just by buying it and letting everyone know you have, but what the hell.

At least someone’s buying again.

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Attention all squirrels: Don’t steal nuts and just think you can get away with it.

BERLIN (Reuters) – Thieves who stole 660 pounds of hazelnuts in Germany have been urgently warned not to eat them.

Hamburg police spokesman Holger Vehren said the sacks containing the nuts were full of poisonous hydrogen phosphate gas, used to extend their shelf life. The nuts must first be treated to make them safe for consumption.

“We’re looking for the perpetrators because they could face a very serious health risk if they eat these hazelnuts,” he said. “The gas is even lethal if they inhale it.”

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