Monday, July 7, 2008

OK - It's Officially A Bear Market!

20% Down
Bear Market Bull Investment
"With the Dow sliding into a bear market on Wednesday, the dark days on Wall Street are far from over, amid record oil prices, struggling consumers and the never-ending credit crisis."
Yahoo Finance

I guess reality is slowly sinking into the market. All is not well and the malaise will probably stick around for a while. At some level we all knew that things will get ugly but thinking is different from experiencing. Now with the market dropping like a rock – the pain is real. Your portfolio is decimated, annualized returns are receding and you start to wonder – what am I doing in the market?

The desire to cut & run is strong. You wince each time the market drops another 100 points. The parade of red down arrows at the end of a trading day is always unpleasant. And the doom & gloom prophecies are gaining momentum. What was hot and prudent yesterday is suddenly iffy and speculative today. Such are the convictions of the market gurus & pundits.

I am staying. Staying because I believe in the robustness of the global business environment. People are getting richer, opportunities for growth are tangible, technology is enabling globalization and yes – long-term equity appreciation is probable. Agreed that there are real issues facing the global economy today but strong demand will lead to strong growth which will lead to strong profits and strong markets.

I am buying what is on sale. Real estate is on sale. Equities are fine but diversification means getting beyond one asset class. With bargains aplenty – why not acquire some real estate. Be a landlord, build some equity, run a business and invest in another asset class.

I am learning. Stick with your gut. The market behaves in irrational ways but it cannot ignore large macro trends. Sooner or later the market will reflect reality. It was obvious early this year that we are headed for trouble but convinced ourselves otherwise. Ignore the noise, do your research and stick with what works for you.

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