The Stock Market has me Nervous Right Now
It seems everyone is nervous about the stock market right now.
We are either in a recession or we are headed right into a recession. Stocks are going to drop and may drop even further. It’s time for a correction. We are already in a correction. Should you sell? Is it time to sell? What should I do?
Many are already busy buying away.
Well, I’m nervous too, but for a different reason: I’m not ready. The stock market is already beginning to correct itself, stocks and indexes are plummeting, and institutional investors are taking their money out of the market.
Being a loyal follower of Warren Buffett and of value investing, I know that it means one thing: there are bargains to be found out there. Mr. Market is going through one of his depressions and he thinks prices need to go down. So they are, regardless of whether or not the businesses behind each stock have done well or poorly.
What does that mean? It means that hundreds of great businesses that have done nothing wrong will see their stock price plummet. The same exact company you had a month ago is still there, only now it’s selling at a fraction of the price, which means only one thing: IT’S TIME TO BUY.
Why am I nervous? Because this is it. This is the time to act. For value investors, this is what we’ve been waiting for, and I’m just not ready. Sure, I have a watch list, but I haven’t updated it in months. Sure, I have some cash to spend, but I was saving that for a down payment. Sure, I know enough about stocks to know when there’s a good business behind it, but it’s been so long since I studied individual stocks that I don’t feel comfortable with my analysis.
The last time I paged through Rule #1 was over a year ago.
We may be going into a recession. We may be going into a correction. We may be going into one of those dives that you see in virtually every single stock chart when it gets to 2002. And every time a value investor sees one of those huge dips he leans back and thinks, “Jeez, I wish I would’ve bought more back then.”
In all fairness, this will be my first correction since I became a financially awake person, so it’s not like I’m slacking off here, but still . . .
How do you feel about the current market conditions? What are you doing about it?
January 14th, 2008 at 4:09 pm
I’m thinking I might short some over-priced stocks like FSLR.
its market cap is $18B with revenue of $350m and net profits of $30 m!
thats just insane!
January 14th, 2008 at 6:55 pm
It’s real tough to say what is going to happen with the market. There is so much turmoil in the economy right now with talks of a recession, inflation, and subprime lending woes. I too am a big fan of Warren Buffet and value investing. It’s hard to go wrong with good, undervalued growth companies. I like to get in after a good earnings report where the market reacts negatively, as long as the forward looking statements still indicate the company will continue to experience good growth.
January 14th, 2008 at 7:27 pm
As another follower of Buffett I agree that there are some mighty good deals out there, but my concern is that we don’t know the true valuation on a lot of these companies yet. It seems like there needs to be a few more months of sub-prime shakeout to see the extent of the bad debt.
Also waiting a bit longer could mean even better deals if the big financial companies have to make further write-downs and someone declares that we are in a real recession now.
January 14th, 2008 at 8:03 pm
I like what you’re saying. Do you guys have any good tips or books that I can use to become better at analyzing financial statements?
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