Bilifuduo (98.35)

The Opportunity of a Lifetime

October 18, 2008 – Comments (2)

It doesn't take an expert economist to figure out that we are in a recession, if not worse. Probably the only reason the government is saying "the financials are sound" is because they don't want to add any more salt to the wound. Instead, they have been trying to stave off another Great Depression and have, surprisingly, responded with un-bureaucratic like efficiency. For example, in just two weeks the Federal Reserve and the Treasury had nationalized Fannie Mae and Freddie Mac, taken over AIG, extended government deposit insurance to $3.4 trillion in money-market funds, temporarily banned short selling in financials, and signed on a $700 Billion dollar bailout. Volatility levels have reached a nearly all time high and the Dow has been trading between 11,500 and 8,500 points in the last three months. All this points to a complete state of frenzy and panic that have erupted from investors, the likes of which are remniscient of the Great Depression. Which makes it an excellent time to buy.

The most important rule of investing is to never let emotions overtake you. Coincidentally, this is also the hardest rule to maintain, which is why so many investors have succumbed to panic, resulting in huge percentage drops in stocks, even in stocks that have nothing to do with bank stocks. No, I am not saying that you should stick your head out and buy financial poison or penny stocks no one knows about and no one cares about. Instead, buy stocks that have been just hammered by the overall mood of the market, ones like tech stocks and commodity stocks. Chances are, once this recession is over, they'll soar back up like nothing ever happened. Warren Buffett once said, "Be greedy when others are fearful, be fearful when others are greedy." If this market is not currently in a state of fear, then I don't know what is.