Friday, March 6, 2009

The Tipping Point - What Now?

This is not real!
"Irrational pessimism - a fear that stock prices are headed in only one direction -- lower and lower".

My wife got on my case last night and stated that we should have sold our investments six months ago and bought them back now. I agreed with her that would have been the smart thing to do. The only problem being - what is obvious now is in hindsight. And everyone's a genius in hindsight.

So I quizzed her - what should we do now? Should we sell now and buy back when the Dow hits 4000 or should we stay put because the market is at the bottom? Obviously her response was - I don't know!

I guess no one knows where we are headed. Citibank at $1, GE at $6, unemployment inching towards 10%, foreclosures in two digits and getting worse ... it's getting scary. Scary to the point of panic and all hope is lost. Too much CNBC, too much negative news, too much doom & gloom starts to take its toll. Ironically - now we are overshooting on the negative by seriously contemplating - can the Dow go to zero?

A global recession and bear market has shaken our trust in capitalism to the extent that we are questioning the future of society, economies and even countries. It is bad - OK it is very bad but to wonder if this is it may be a little too fatalistic.

In my view - we are facing a financial crisis, which will abate. It will take time, markets will change, players will change and maybe the rules will change but eventually we will persist. This is the time to entrench, reflect, assess and invest.

“Though the path has not been smooth, our economic system has worked extraordinarily well over time. It has unleashed human potential as no other system has, and it will continue to do so.”
Warren Buffett 2009

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