Tuesday’s Investment (and Life) Advice: Stop, Breathe, THINK.

People are freaked. Asia’s been smashed. Europe is in the toilet. And the US recovered from an early morning swan dive thanks to the Fed’s 75 bp easing, yet the credit markets aren’t exactly buying it (I mean, has anything really changed in the wake of more accomodative Fed policy except to telegraph their deep concern over the state of the economy?). In short, the “deep crap” scenario I’ve written about many times is now clearly playing out (notwithstanding my friend Mr. Kedrosky’s missive about the excessive bearishness of financial stock bloggers), and it is at times like these when some clear and powerful messages need to be repeated to keep those among us from doing colossally stupid things (like selling low and buying high, which is part and parcel of the human condition).

And if there is one message I’d like to suggest, three particularly sage words that are sufficient to guide our actions during the most difficult of times, I’d like to share the following wisdom uttered by Steve from that fine kids show, Blue’s Clues:

Stop. Breathe. THINK.

Seriously, is anything more complicated needed for most of us right now? I don’t think so. So let the elephants stomp and the angels cry and celestial bodies spin backwards on their axes for a while. It’s just not worth getting all in a froth about things. If you are diversified, that is. If you have all your money in a high vol stock which is exhibiting tremendous downside volatility at the moment, well, you haven’t been reading this blog and I can’t help you. But if you do have a modicum of diversification, some stocks, some bonds, some cash, some real estate, a little gold and energy ETFs here and there, and if your time horizon is more than a month or two, you’ll be ok. And by all means lay off the CNBC and Fox News for a bit - it will give you an ulcer. Even give the business page a rest for a few weeks. Or maybe a few months. Or more.

Pull out the New York Times crossword, sharpen your skills, read a good book and hold on. Because the financial markets won’t be in turmoil forever. And your portfolio will benefit from listening to that prophet Steve that has been telling your kids the exact same thing. Whether you are trying to cope with anger and frustration towards a friend, a parent, a sibling or the financial markets it is all essentially the same. Staying cool and resisting your negative impulses will set you free.

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COMMENT:

AUTHOR: Paul Rubillo

EMAIL: prubillo@dividend.com

URL: http://dividend.com

DATE: 01/22/2008 08:28:32 PM

Roger, great point. I blogged about turning the volume down at a minimum to avoid hearing  the market pundits screaming all day.  We are focusing on, and beginning to educate investors about  the benefits of Dividend stocks and the historic 11% + annual returns over the last 75 years. Buying companies with solid fundamentals and attractive dividend yields is a solid long-term plan. Using sell-offs to scale in more is a great strategy. We recommend leaving the intra-day stuff to the nimble traders. Dividend.com will have a new design soon and hopefully you and your readers will check it out.

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COMMENT:

AUTHOR: Ian Spivey

EMAIL: ispivey@alum.mit.edu

URL: 

DATE: 01/23/2008 01:47:21 PM

A funny thing happened to me yesterday.  I was talking about how ridiculous the markets have been behaving, when my girlfriend said to me, “But you told me that no one actually loses money until they have to sell, right?”    Then I took a deep breath and felt better.

From the mouth of babes comes with wisdom of Ben Graham!  Although you could argue that adage doesn’t apply to investment bank or bond insurance executives.

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COMMENT:

AUTHOR: Lacidar

EMAIL: lacidar@lacidar.com

URL: 

DATE: 01/23/2008 06:01:41 PM

There is a difference this time. Most of the securities “marked down” and therefore not sold, will never return to levels much higher than current levels.

Most were never worth what they were originally sold for, therefore will remain “marked down” until their cash flows end or they end in default. Expect some things we have seen before. The failure of large institutions (remember Enron), and yes court battles, and even public figures walking those steps into the courthouses.

There is much more to come so hang on, this is unlike anything finance has seen.  

The world will go on, and the human race will continue, that’s not the issue.

Look for change…things will get more and more different in the way we do business globally.

Expect years of change, perhaps 12 years or more. (12 is a random number I picked)

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2 years ago | view comments |  Current Affairs