Wednesday, September 22, 1999
Consider stockpiling cash until after the turn of the millennium. I know, I know -- another alarmist. On the contrary, I think Y2K will be harmless, but I think an educated Fool can turn a profit on the fears of the Wise.
I recall the 1995 movie Strange Days, which contains a subplot alluding to the end of the millennium as the end of the world. This was a "techie" type of science fiction movie with lots of computerized gadgets in the "future" -- 1999. But the theme was not about the crash of computers, rather the crash of society. As the new millennium approached, chaos began to deteriorate our already delicate societal balance. This chaos reached its climactic focus as the clock struck 12. But (and this is the key) minutes later, a tenuous stability returned and society lived on.
So why am I ranting about a (possibly) prophetic sci-fi film from 1995? What does this have to do with us Fools? Well, it is a backdrop, a prediction if you will, of what is to come. Recently a huge amount of money has poured into the market based on unFoolish notions that tech stocks (and likely the market) can rise exponentially forever. Much of this money is from amateurs who have never invested before. Most of them are not Foolish and many of them don't know anything about the companies or funds they have invested in. Except, of course, the expectation of grand returns.
I was one of those amateurs until very recently. In fact, I am still an amateur, but I am now a Foolish amateur. As far as I can tell, today's unFoolish market is being driven by pipe dreams of overvalued (primarily) tech stocks. These dreams are a self-fulfilling prophecy -- the more the dreamers invest, the higher prices go, the more money they make, the more they invest. Do we see a pattern here?
Sounds great, right? Wrong! The bottom will drop out (well, at least a little) when the pipe dreamers lose their shirts (and homes, and cars, and family, etc.). All of these fools will sell in the scare and the market will go through a significant, but fair correction.
That said, what the heck does Y2K have to do with this? Whether Y2K is the apocalypse or just a bad hangover, the FEAR of Y2K will send the dreamers running for cover. Emotion, not research, drives these investors. I plan to stockpile the cash that I would normally add to my current portfolio. I will allow my current holdings to ride the storm; after all, they are long-term buy and holds anyway. But in early 2000, I will have a nice chunk of change just waiting to go into the Foolish Four. What then? Bargain prices on stocks that I would likely buy at higher prices on a different day. Let the Foolish Longs prosper but hold off until the next millennium.
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