Brief update re the markets
This notion comes about despite the overt, but obvious, ugliness of the general market's chart patterns. Of course, I recognize today's headlines are especially scary -- enough to frighten away even the staunchest investor. Please understand, if not accept, that (mainstream) journalism no longer is what it once was; the journalist today merely reports the momentous news of that particular moment, and fails to see the less obvious changes. We each, as investors, must do more than scan headlines and mere reportage to find truth: "Why do stocks decline?" is good for a start. Better would be "Why do most stocks not keep pace with the market's decline?" And therein lies a tale worth telling.
If you perceive as I do that this moment is an opportunity for long side investors, please recall this crucial investment rule applicable to moments such as now: Purchase the outliers only -- the stocks that have declined the least and the stocks that have declined the most. And ignore the great bulk of stocks that crowd the middle. But before you get all cute with your portfolio, this rule excludes Lehman/LEH and AIG, et al. You want to purchase the stocks of companies that you intend to own for a long time... and which will still be around then, leave alone tomorrow.
-- David M Gordon / The Deipnosophist
Labels: Market analyses