I just read this article and was floored. Point of no return: Interest on T-bills hits zero
. The great quote which sums up this entire global meltdown is the following, “Investors are so nervous they’re willing to accept the same return from government debt that they’d get from burying money in a coffee can – zero.” This is just the sign of the times but it also points to investors wanting safety so badly that they are willing to accept no interest or even a slight loss as long as they are in liquid, secure investments. As a student of human nature and history I have noticed when the pendulum has swung so far the other way it is usually indicative of a bottoming in the market. My good friend Steve Kann, who was interviewed in an earlier post, said that his favorite quote was one from Warren Buffett; “We simply attempt to be fearful when others are greedy and to be greedy only when others are fearful.” This comes from arguably one of the greatest investors of our time and the statement is true.
There are companies right now with stock prices that are trading below breakup value and in some instances below cash. You can buy into some companies right now that have more cash in the bank than they have market capitalization. The fear in the market is rampant and in some cases the fear has priced some very good companies at historical lows. Why? The main reason is a loss of confidence in how companies report what is on their financial statements. As silly as the markets can become (i.e. the internet bubble and housing price escalation) they can conversely be as irrational on the downside. The most posed question to me at parties or in Peets Coffee is, “should I stop putting money in my 401k?” My answer is simple, if you would like to buy high and sell low then yes stop putting money in. Obviously, the answer is somewhat tongue in cheek but for the most part it is true. The sacred 401k is the ultimate retirement vehicle and should be viewed with a long term investment perspective, not traded regularly. A 401k should be assessed at most once a year for global macro trends and then adjusted accordingly.
I feel that I am ranting and yes, rambling on, so I will end it here. My model portfolio looks pretty good so far, one winner QTWW up about 40%, one loser BHRT down about 12% and one flat IDW.V.
More follow up to come, stay tuned…
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