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Old 10-07-2008, 10:55 AM   #1
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From Today's WSJ

An excerpt from today's (10/7/08) Wall Street Journal by columnist Jason Zweig:

As an investor, however, it's absolutely vital to separate what you can truly control from what is beyond your control. The only thing you can know for sure is that stocks are steadily getting cheaper. You cannot control whether or not the market will continue to trash stocks, but you can control how you respond.

If we are not headed into a depression, panic hardly seems justifiable.

What if we are?

Even during the Great Depression, the best investment results were earned not by the people who fled stocks for the safety of bonds and cash, but by those who stepped up and bought stocks and kept buying on the way down. A man named Floyd Odlum made millions of dollars putting his cash into battered stocks. His motto throughout the market nightmare of 1929 to 1932 never changed: "There's a better chance to make money now than ever before."
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Old 10-07-2008, 10:58 AM   #2
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Good one, Stephenandrew! Thanks for sharing that excerpt.

I'll just keep repeating the mantra: "be fearful when others are greedy, be greedy when others are fearful"
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Old 10-07-2008, 10:58 AM   #3
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pretty sure he did some research and not just bought any stock that went down
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Old 10-07-2008, 03:55 PM   #4
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I've always thought that when markets are good, things are never as good as people think, and when markets are bad, things are never as bad as people think. I know I am not the first to think of this, but it helps keep things in perspective.

Near the peak in 1999 I was playing golf with a retired man in Florida. He stated that with the run in the market, he was able to live a much better life in retirement then he had anticipated. I was happy for him, but statements like that, out of the blue (it's not like I was asking how his portfolio was doing) get me thinking that we must be nearing a peak. When everyone is on board, who's left to drive up the price? And of course market bottoms are famous for their magazine covers, and I got my Time magazine this week with a picture of the Depression on the cover. And also to further convince me we are near a bottom, my dad calls up and tells me how the market is doing today (Oh, hey dad. I haven't heard from you in a couple of months but thanks for the market update).

Can things get worse? I guess they can, but as long as I am working, I'll keep maxing out my 403b and we'll see how I am doing 5-10 years from now.
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Old 10-07-2008, 04:01 PM   #5
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And of course market bottoms are famous for their magazine covers, and I got my Time magazine this week with a picture of the Depression on the cover. And also to further convince me we are near a bottom, my dad calls up and tells me how the market is doing today (Oh, hey dad. I haven't heard from you in a couple of months but thanks for the market update).
The market can stay irrational longer than you can remain solvent.

You wrote that the Florida golfer told you that in 1999. It continued until 2001. The housing crisis has been recognized at least since 2005. It only started to fall apart last year.

It may be a market bottom but it could stay in the troughs a long time.
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Old 10-07-2008, 04:24 PM   #6
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I'm holding and staying put!!!...I have not let my shaking knees take over what I know for sure ...and that is that the best time to stay put and keep buying is when there is blood on the streets....and Lord knows that this patient is in need of some tranfusions. Just in case, I've put on my parachute so that if the worse comes to pass I will be jumping off the tallest building....and when I lend safely I will just start anew. I do feel panicky but I have to say that I have yet to feel the panic and to see the panic in the streets that I witnessed in Argentina in the late 1980's and again in the early 2000's.
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Old 10-07-2008, 04:27 PM   #7
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As long as people keep having cash to plow into a depressed market, they will be in great shape when it recovers. I doubt it took a huge amount of money invested in 1931-32 to have a great long-term return even with the wealth that vanished from late 1929 into mid-1932.

But that requires having the cash, which for many people means both (a) keeping their jobs and (b) living below their means to have the positive cash flow to invest.
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Old 10-07-2008, 04:27 PM   #8
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It may be a market bottom but it could stay in the troughs a long time.
I'm OK with that.
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Old 10-07-2008, 06:55 PM   #9
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Originally Posted by eridanus View Post
The market can stay irrational longer than you can remain solvent.

You wrote that the Florida golfer told you that in 1999. It continued until 2001. The housing crisis has been recognized at least since 2005. It only started to fall apart last year.

It may be a market bottom but it could stay in the troughs a long time.
Time magazine has been an amazing predictor or when to do the opposite thing
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Old 10-07-2008, 07:23 PM   #10
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[quote=eridanus;727273]The market can stay irrational longer than you can remain solvent.

You wrote that the Florida golfer told you that in 1999. It continued until 2001. The housing crisis has been recognized at least since 2005. It only started to fall apart last year.

It may be a market bottom but it could stay in the troughs a long time.[/quote]


Thanks Eridanus. I bought quite a bit more today, some for trades, others for long term. However, my friend called an said I was crazy. I am beginning to see his point that we are heading into a rcession/depression and we may stay there a long time even when the economy starts improving. We keep hearing the Mutual Fund industry telling us to stay the course, they are not suffering the losses we are suffering, they keep on getting their fees... stay the course - damn reminds me of Iraq. Anyway, I will probably regret putting money to work again today. The last four buys are all under the water.

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Old 10-07-2008, 10:47 PM   #11
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[quote=Disappointed;727413]
Quote:
Originally Posted by eridanus View Post
The market can stay irrational longer than you can remain solvent.

You wrote that the Florida golfer told you that in 1999. It continued until 2001. The housing crisis has been recognized at least since 2005. It only started to fall apart last year.

It may be a market bottom but it could stay in the troughs a long time.[/quote]


Thanks Eridanus. I bought quite a bit more today, some for trades, others for long term. However, my friend called an said I was crazy. I am beginning to see his point that we are heading into a rcession/depression and we may stay there a long time even when the economy starts improving. We keep hearing the Mutual Fund industry telling us to stay the course, they are not suffering the losses we are suffering, they keep on getting their fees... stay the course - damn reminds me of Iraq. Anyway, I will probably regret putting money to work again today. The last four buys are all under the water.

mP

If this reminds you of Iraq, perhaps it's time for the surge!
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Old 10-08-2008, 09:50 AM   #12
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Stephenandrew,

Thanks for pointing me in the direction of the article. I went to WSJ and found Jason's view of today's events very true and interesting. I have a lot of respect for Jason Zweig as he is one of a few financial journalists that I trust.

The article reinforces what I've been doing over the past several days, which is to dollar cost average some of my cash into my Vanguard Total Stock Market Fund.

There is a lot of panic in the world and now is a good time to get bargain prices on otherwise stable and profitable companies. Being a little guy, I won't get rich because of it, but I can certainly improve my financial situation by purchasing "stocks for the long run" at fire-sale prices.

Edit:typo
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Old 10-08-2008, 10:24 AM   #13
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Quote:
Originally Posted by stephenandrew View Post
An excerpt from today's (10/7/08) Wall Street Journal by columnist Jason Zweig:

As an investor, however, it's absolutely vital to separate what you can truly control from what is beyond your control. The only thing you can know for sure is that stocks are steadily getting cheaper. You cannot control whether or not the market will continue to trash stocks, but you can control how you respond.

If we are not headed into a depression, panic hardly seems justifiable.

What if we are?

Even during the Great Depression, the best investment results were earned not by the people who fled stocks for the safety of bonds and cash, but by those who stepped up and bought stocks and kept buying on the way down. A man named Floyd Odlum made millions of dollars putting his cash into battered stocks. His motto throughout the market nightmare of 1929 to 1932 never changed: "There's a better chance to make money now than ever before."

This is a total mischaracterization of Floyd Odlum. In the summer of 1929, he actually became sure stocks were going to crash and sold 100 percent of all his stock holdings. Then flush with cash from the top of a stock market boom he had 14 million as the stock market crashed. He picked and choose individual stocks and industries based on his readings of political winds, including dumping all utilities when Roosevelt was reelected in 1932 fearing government regulation.

He became wealthy by
1: Got out at the very top
2: Got in after the crash
3: Proper selection of individual companies not buying the entire market.

A corollory to this would be anyone sitting at 100 percent cash will be able to pick up some very nice bargains, not that stock holdings will make you wealthy don't worry. Anyone fully invested in October 1929 did not experience anything near the gains of Floyd by staying invested
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Old 10-08-2008, 11:52 AM   #14
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This is a total mischaracterization of Floyd Odlum. In the summer of 1929, he actually became sure stocks were going to crash and sold 100 percent of all his stock holdings. Then flush with cash from the top of a stock market boom he had 14 million as the stock market crashed. He picked and choose individual stocks and industries based on his readings of political winds, including dumping all utilities when Roosevelt was reelected in 1932 fearing government regulation.

He became wealthy by
1: Got out at the very top
2: Got in after the crash
3: Proper selection of individual companies not buying the entire market.

A corollory to this would be anyone sitting at 100 percent cash will be able to pick up some very nice bargains, not that stock holdings will make you wealthy don't worry. Anyone fully invested in October 1929 did not experience anything near the gains of Floyd by staying invested
That's interesting---was trying to find and share something that mind be a little bit soothing inthese turbulent times. I never heard of Odlum before this reference, so I don't doubt your statement. Oh well, I will need to look for inspiration elsewhere!
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Old 10-08-2008, 02:08 PM   #15
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most of the wealthy people who made money in stocks, especially in the 1920's and 1930's didn't buy and hold
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Those geniuses at Citicorp Hit It Again
Old 10-08-2008, 02:43 PM   #16
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Those geniuses at Citicorp Hit It Again

Today they said sell! Ford and GM. Until today they were a hold.

No doubt these companies are on life support, but this will likely be a bottom for them too, at least for awhile.

Also, did you notice that VIX hit 59+ today? New record.

Ha
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Old 10-08-2008, 08:49 PM   #17
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most of the wealthy people who made money in stocks, especially in the 1920's and 1930's didn't buy and hold
One wealthy person who got very wealthy was Ty Cobb who was pretty much a one stock man - Coca Cola. Coke never did decline much in the depression and paid good dividends. Ty Cobb was almost an unreformed Scrooge, one of the wealthiest and lonliest men of the 30's 40's to 60's
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Old 10-09-2008, 04:42 PM   #18
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Originally Posted by eridanus View Post
The market can stay irrational longer than you can remain solvent.

You wrote that the Florida golfer told you that in 1999. It continued until 2001. The housing crisis has been recognized at least since 2005. It only started to fall apart last year.

It may be a market bottom but it could stay in the troughs a long time.
The golfing was during Christmas break (Dec. 1999) and to the best of my knowledge the S&P (closing price) peaked on 3/24/2000 and by 10/9/2002 (oh, six years ago today) it had dropped 49%. So the golfer's contrary indicator wasn't too far off.
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