Do you know why I’m upset with myself this morning? Because I don’t have enough spare cash on the sidelines to invest in a few stocks I’ve been watching.  We don’t know how deeply the Bear will claw it’s way through the market in the weeks ahead, but there are some amazing valuations out there.  Look at Conoco-Phillips (COP) trading witha P/E just below 6, or Apple (AAPL) down around 90 with a P/E of 18.  Or YUM Brands (YUM) falling to a new 52 week low below 29 with a P/E around 15.   And eBay? Holy cow… eBay once loved by so many (including me) has fallen to below 18 on earnings warnings, but sporting a too-hefty P/E that just won’t cut it in today’s markets.   But look at Goldman-Sachs (GS) or General Electric (GE) at an 11 year low, to follow Warren Buffet’s lead.
So is this it? Is this Wall Street falling off the cliff? Are we so totally out of confidence, that there is no interest and no trust for investors to wade back in?  That’s what the bug-eyed folks are saying who are panicking. And they’re proabably right, at least partly, and at least for the short term.
But if I had more cash to invest with, I would be looking for bargains. If the market falls more? I’d be looking for more bargains. Yes this may be a very difficult investment climate for the next few years. We may not see returns on money we put in for many years down the road. But all I know is the “opportunity bells are ringing” loud and clear that if you have extra long-term cash available to invest, this is a great time to pick and choose those companies you’ve always wanted to invest in.
There are few times in our lives when markets offer such opportunity as they do now (and may offer even more tomorrow). It involves Summoning the Courage to Buy Stocks. We will long remember these days, as did many of those who came before us.Â
“…investments everywhere are priced as if the whole solar system were going out of business. U.S. stocks have lost 24% since Jan. 1; foreign stocks are off 32%; emerging markets, nearly 40%; junk bonds are down 13%; even municipal bonds have fallen almost 10%. Money is pouring into U.S. Treasury debt — so much so that stocks now offer more income than bonds do. The dividend yield on the Dow Jones Industrial Average is currently at 3.14%, higher than the 2.68% yield on the five-year Treasury note.”
“With so many professional money managers afraid to act, with most of the public in the grip of fear and anger, you should put your cash and your courage to work. If you have no cash, use your courage: Rebalance by selling a little of anything that’s gone up and buying more of whatever’s gone down.”
“If you have both cash and courage, make a list of 10 stocks you’ve always wanted to own at “the right price.” Chances are, they are cheap. Better yet, think of an investment category you’ve long wanted to venture into, like emerging markets. Chances are, it is on sale. Just about everything is.”
But there is a catch. You darn well better not be gambling with money you don’t have. That’s money you’re going to need over the next 5 years for something else. Medical bills, a house, a car, food… Because this market will kill you. It will slice you up in a heart beat if you’re not sure what you’re doing. And even if you think you know what you’re doing.
I’ve got one investment down over 50% because I was too stubborn and not disciplined enough to sell. And I’m not selling now, which means that money is dead for who-knows-how-long.   So you need to think long and hard about investing in this market, and be sure you pick a solid company with a strong balance sheet that can weather the storms ahead.  Because your stomach will be riding right along with it.
Aside from all of that, it’s a beautiful day today. Hang in there.
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