“Fear is my friend. Euphoria is my enemy.”
-Warren Buffett
In a continuing effort to be a rational economic voice in a world gone mad, today you need to hear about the ability to allow your intelligence to trump your fear.
I believe that the key to successful investing is the ability to think straight while the world is falling apart. Investors lose money needlessly when they succumb to fear. That is where we currently are in the cycle and it is what capitulation is all about. Buffett said it as succinctly as it can be said.
Fear is his friend and it is your enemy.
I am not suggesting that Buffett is trying to scare you so that he can continue to make money for his Berkshire-Hathaway shareholders by picking up value after value. I can tell you I am a little perplexed by the necessity for him to tell all of us in his annual report to shareholders that 2009 will be abysmal or words to that effect.
As the market opened this morning, indeed; they were quoting Buffett and the market is in danger of closing below 7,000 on the Dow and 700 on the S&P. I can tell you that if it does close below those levels, there could be significantly more pain before the market finds technical support. By then, you guys will have thrown in the towel losing 60% of your market value over the last 18 months and Buffett will be voraciously coveting your misfortune.
Why would you let him? Make no mistake, cash is king in this market and the Oracle of Omaha still dons a rather shiny crown. You, on the other hand, may not even have a job much less bejeweled accoutrement. None of that provides the luxury of checking your brains at the door. But, if you are not careful, it will provide the excuse that you roll out in 10 years as to why you did not make money during the next bull run.
My responsibility is to do the best I can through my television and radio commentaries and these daily blog commentaries to teach you; to instruct you how this process really works. I recognize full well that, at this point, you probably take me for an aging fool who holds a little too tightly to our nation’s history, and therefore can not see that the sky is indeed falling this go-around.
That does not relieve me of the responsibility to tell you that selling at these levels is wrong.
I think there is a predisposition for fear in the marketplace. I believe that when that predisposition manifests itself, markets go down. I also believe that the people who understand the mechanism get in when you get out.
Before you declare me an out of touch zealot, please answer one simple question:
Since in order for a sale of an equity to go through, there has to be (a) a buyer and (b) a seller; if every smart person in America is selling out, who is buying?
Could it be the Warren Buffetts of the world? I would bet so. In a way, it’s a game. As convinced as you may be that the United States of America is going to heck in a hand basket; there is somebody out there who believes precisely the opposite. And, as much as you hate to hear those of us who have some perspective preach about the past…I have to. So, what do the lessons of the past 233 years of this grand experiment called capitalism have to teach us?
John Templeton turned 10,000 dollars into 1,000,000 dollars from 1940 to 1950 by buying every single stock that traded for less than one dollar on the New York Stock Exchange. He knew that with war approaching, you all would be scared right down to your skivvies. He was right and my challenge for all of you is to stay on the right side of this equation. The alternative to those of us who believe tomorrow will be a better day, is a rather vociferous group of folks that believe that this market is going to zero.
I don’t believe that it will and I am putting my money where my mouth is. I hope you will too.
Have PoliticalMavens.com delivered to your inbox in a daily digest by clicking here
