The Oracle of Omaha to the rescue? Warren Buffett has issued a "buy" signal:
http://www.nytimes.com/2008/10/17/opinion/17buffett.html
A simple rule dictates my buying: Be fearful when others are greedy, and be greedy when others are fearful.
"And if an epitaph be my story, I'd have a short one ready for my own: I had a lover's quarrel with the world." -- Robert Frost
Friday, October 17, 2008
Over-Correction Overhyped
I am tired of reading articles about how we are not near the low, and how markets tend to over-correct when rebounding from a crash. Almost every article I am reading now talks about the possibility of over-correction, i.e., another 20% drop in the S&P 500.
First, the prevalence of such pessimistic articles is a contrarian signal. Second, Warren Buffett just highlighted that he was buying major U.S. stocks (he's probably adding to his Coca-Cola (KO) and Wells Fargo (WFR) holdings), because he thought they represented reasonable values. And third, almost all the articles base their theory on the 1929 and 1987 crashes. See, for example, this article:
http://www.minyanville.com/articles/spx-charts-TD-technicians/index/a/19550
The above article and ones similar to it fail to distinguish between 1929, 1987, and 2008. In 1929, the government acted too late. Bernanke himself has cited a failure of speedy government intervention as one cause of the Great Depression. In 1987, again, the government arguably did not intervene quickly enough and did not pump into the market substantial taxpayer monies to inspire investor confidence. In addition, the crash of 1987 did not lead to a prolonged bear market--within two years, markets had begun moving substantially higher.
Now, in 2008, not only is the U.S. government inserting between 700 billion and 2 trillion in the markets, but worldwide governments (the G-7) are following suit. Thus, the current situation is completely different from 1929 and 1987. As an attorney, I see briefs all the time where opposing counsel uses one line from an appellate court's opinion that supports his or her client, but fails to mention that the case involved completely different facts, diminishing its applicability. Investors and writers who compare 1929 and 1987 with 2008 are making the same amateurish and unfortunate mistake.
First, the prevalence of such pessimistic articles is a contrarian signal. Second, Warren Buffett just highlighted that he was buying major U.S. stocks (he's probably adding to his Coca-Cola (KO) and Wells Fargo (WFR) holdings), because he thought they represented reasonable values. And third, almost all the articles base their theory on the 1929 and 1987 crashes. See, for example, this article:
http://www.minyanville.com/articles/spx-charts-TD-technicians/index/a/19550
The above article and ones similar to it fail to distinguish between 1929, 1987, and 2008. In 1929, the government acted too late. Bernanke himself has cited a failure of speedy government intervention as one cause of the Great Depression. In 1987, again, the government arguably did not intervene quickly enough and did not pump into the market substantial taxpayer monies to inspire investor confidence. In addition, the crash of 1987 did not lead to a prolonged bear market--within two years, markets had begun moving substantially higher.
Now, in 2008, not only is the U.S. government inserting between 700 billion and 2 trillion in the markets, but worldwide governments (the G-7) are following suit. Thus, the current situation is completely different from 1929 and 1987. As an attorney, I see briefs all the time where opposing counsel uses one line from an appellate court's opinion that supports his or her client, but fails to mention that the case involved completely different facts, diminishing its applicability. Investors and writers who compare 1929 and 1987 with 2008 are making the same amateurish and unfortunate mistake.
Warren Burger on Self-Restraint
In PAPISH v. BOARD OF CURATORS OF THE UNIVERSITY OF MISSOURI ET AL. (1973), a case about the limits of free speech on campus, Justice Warren Burger dissented. His dissent advocates self-restraint as a core American value:
In theory, at least, a university is not merely an arena for the discussion of ideas by students and faculty; it is also an institution where individuals learn to express themselves in acceptable, civil terms. We provide that environment to the end that students may learn the self-restraint necessary to the functioning of a civilized society and understand the need for those external restraints to which we must all submit if group existence is to be tolerable.
http://www.law.umkc.edu/faculty/projects/ftrials/firstamendment/papish.html
In theory, at least, a university is not merely an arena for the discussion of ideas by students and faculty; it is also an institution where individuals learn to express themselves in acceptable, civil terms. We provide that environment to the end that students may learn the self-restraint necessary to the functioning of a civilized society and understand the need for those external restraints to which we must all submit if group existence is to be tolerable.
http://www.law.umkc.edu/faculty/projects/ftrials/firstamendment/papish.html
Wednesday, October 15, 2008
Are You Rich?
Are you rich? It depends on where you live:
http://www.usnews.com/articles/business/your-money/2008/10/09/what-it-takes-to-be-rich--where-you-live.html
The problem is, the numbers represent an average, not a median, which reduces their relevance. On the bright side, there are lots of lovely numbers for stat geeks like myself.
http://www.usnews.com/articles/business/your-money/2008/10/09/what-it-takes-to-be-rich--where-you-live.html
The problem is, the numbers represent an average, not a median, which reduces their relevance. On the bright side, there are lots of lovely numbers for stat geeks like myself.
National Geographic on Iran: "Knowledge of self is knowledge of God"
National Geographic has an interesting article on Iran and its past:
http://ngm.nationalgeographic.com/2008/08/iran-archaeology/del-giudice-text
They like to say, for instance, that when invaders came to Iran, the Iranians did not become the invaders; the invaders became Iranians. Their conquerors were said to have "gone Persian," like Alexander [the Great], who, after laying waste to the administrative practices, took a Persian wife to do the same in a mass wedding. Iranians seem particularly proud of their capacity to get along with others by assimilating compatible aspects of the invaders' ways without surrendering their own - a cultural elasticity that is at the heart of their Persian identity.
The author, Marguerite Del Giudice, really did her homework--it's very hard to define words that have no direct translation in English, but she aptly defines the word, "taarof," which means "fighting for the lower hand." To understand this word provides substantial insight into Persian culture. The article also lists the best Persian poets: Rumi, Sa‘id, Omar Khayyám, and Hāfez .
Thanks to Alison Bryan for the tip (August 31, 2008 posting):
http://www.alisonbryan.com/blog/
http://ngm.nationalgeographic.com/2008/08/iran-archaeology/del-giudice-text
They like to say, for instance, that when invaders came to Iran, the Iranians did not become the invaders; the invaders became Iranians. Their conquerors were said to have "gone Persian," like Alexander [the Great], who, after laying waste to the administrative practices, took a Persian wife to do the same in a mass wedding. Iranians seem particularly proud of their capacity to get along with others by assimilating compatible aspects of the invaders' ways without surrendering their own - a cultural elasticity that is at the heart of their Persian identity.
The author, Marguerite Del Giudice, really did her homework--it's very hard to define words that have no direct translation in English, but she aptly defines the word, "taarof," which means "fighting for the lower hand." To understand this word provides substantial insight into Persian culture. The article also lists the best Persian poets: Rumi, Sa‘id, Omar Khayyám, and Hāfez .
Thanks to Alison Bryan for the tip (August 31, 2008 posting):
http://www.alisonbryan.com/blog/
Market Gyrations
I sold off several positions on Tuesday. I wanted to do a stocks update, but I am in the middle of trial prep, so I will offer only my remaining open positions over 2,000 dollars:
EMC
EZU
PFF
SWZ
YHOO
My biggest loser thus far? Yahoo (YHOO). Unfortunately, I continued to average down, and my average buy price is around 18. The lesson? Never catch a falling knife, no matter how cheap the stock seems.
EMC
EZU
PFF
SWZ
YHOO
My biggest loser thus far? Yahoo (YHOO). Unfortunately, I continued to average down, and my average buy price is around 18. The lesson? Never catch a falling knife, no matter how cheap the stock seems.
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