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Dave’s Investment Blog » Blog Archive » Looking Forward Oct. 14, 2008
Dave’s Investment Blog
Welcome at » Looking Forward Oct. 14, 2008

Looking Forward Oct. 14, 2008

I hope you are all appreciating the many great things in your life. Now is not the time to look backwards. Now is the time to look forwards. I’m not calling a bottom in the global financial markets. There is only one way to make money investing in the stock market. It doesn’t matter if you are long or short stocks this rule holds true Buy Low and Sell High.

If any of you don’t think prices are low for stocks please send me an email with your justification.

Prices are at historical lows. They might get lower by a little or a lot. The only way anyone is going to make money is by taking the contrarian position. The contrarian is buying!

This doesn’t mean that you hold on to what you own no matter what. It means that the allocation that you have in the stock markets you keep. So if you sell one stock you buy another.

Now is not the time to take money out of the stock market, unless it is money that you will need to spend over the next five years. Any money that you need to spend in the next five years should not be in the market. If you have money you need to spend in the next five years in the market, whether it is a Bull Market or a Bear Market, you need to withdraw it from the stock market.
Now let’s look at this market.

“AT THE DEPTHS OF THE 1973-74 BEAR MARKET — the worst of the post-war period — when the Dow Jones industrial average was approaching its low of 577, Warren Buffett told Forbes magazine that he felt like “an oversexed guy in a whorehouse. This is the time to start investing.” ” Barron’s Online Monday, October 13th, 2008.

Warren Buffet has been buying American corporations again. A year ago he couldn’t find anything in the United States to acquire. The prices were too high! I guess the price is right for Warren Buffet now.

This is one of the best buying opportunities in the U.S. Stock Markets I have ever seen in over 23 years!

$1 invested in stocks from February 1966 through May 2007 would have grown to $16.58. This is a rate of return of 7% per year. From May of 2007 through today October 14, 2008 your $16.58 would have dropped to $10.97. A drop of 33.8%!

Your rate of return from February 1966 through October 14, 2008 would have dropped to 5.773% which is still better than 7.3 cents you were left from your $1 investment in February 1966 with if you were out of the market in the five best days each year from February 1966 through October 14, 2008.

While now is not the time to sell, it is a great time to reposition and keep your allocations in line with your investment philosophy. If you are overweight or underweight the financial sector, know your rationale and follow it.

If you don’t have an allocation rationalization, it’s a good time for you to subscribe to DavesFavs.com because I provide one that has successfully outperformed the S&P 500.

Have a fantastic, profitable day!
Dave

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