How Bad Will It Get?

It's grim out there. The market is down 24% since the beginning of September. The financial contagion that started with the U.S. subprime mortgage defaults has spread to Europe and Asia. Fully 60% of Americans now believe that a depression -- replete with 25% unemployment and widespread homelessness and hunger -- is "likely." And just 9% of Americans, an all-time low, are satisfied with the way things are going in the country.

It's gotten so bad, in fact, that the Booyah Bull himself, Jim Cramer, told investors on Monday to pull any money they need for the next five years out of the market.

Now, that's not necessarily bad advice
Of course, you should never be investing the hard-earned dollars that you need to pay your bills over the next few years. But if you heed the wisdom of the late Sir John Templeton -- whom we recently eulogized as the world's most important investor -- you should always be ready, willing, and able to invest some of your long-term savings in common stocks at -- and this is crucial -- the point of maximum pessimism.

What can happen when you buy at the point of maximum pessimism? Well, as Sir John proved when he famously purchased 100 shares of 104 companies trading for $1 per share or less in 1939, as the market panicked at the outset of World War II, you can make a lot of money.

The good news for you today is that given that data presented above, we're getting pretty darn close to that point -- only 9% of Americans are left to be convinced.

An important caveat
This, however, does not mean that the market has bottomed. It could well get worse before it gets better, particularly since the credit markets remain frozen and home prices look like they have a bit more "rationalizing" to do.

But some stellar businesses are already selling at hefty discounts to the norm:

Company

Current P/E

5-Year Average P/E

Microsoft (Nasdaq: MSFT  )

12.3

25.1

Paychex (Nasdaq: PAYX  )

17.9

35.3

Intel (Nasdaq: INTC  )

13.4

24.4

Fastenal (Nasdaq: FAST  )

20.9

33.9

Ritchie Bros. Auctioneers (NYSE: RBA  )

27.2

31.2

Nike (NYSE: NKE  )

15.3

20.0

Best Buy (NYSE: BBY  )

12.1

22.4

Data from Morningstar.com.

Are you brave enough to start today?
Rather than try to time the market and catch these names on the way back up, start dollar-cost averaging into an array of superior names now (remember, Sir John purchased shares in 104 companies) with a commitment to holding shares for the next five years or more. That's the only time-tested way to turn current market volatility to your advantage, and the rewards will be great for those with the courage and resources to do so.

The key, though (and this bears repeating), is to average in -- keeping some money on the sidelines if the market continues to drop -- and adding new money, even in a small amounts, on a regular basis. That's a particularly prudent tack today, given the low costs of trading and the violent unpredictability of today's stock market.

If you're looking for additional superior stock ideas that are worth buying today, you can see what Fool co-founders David and Tom Gardner are recommending to members of their Motley Fool Stock Advisor service free for 30 days. Click here for more information.

Tim Hanson owns no shares of any company mentioned ... yet. The Motley Fool owns shares of Best Buy. Microsoft, Intel, and Best Buy are Motley Fool Inside Value recommendations. Best Buy is also a Stock Advisor pick. Paychex is an Income Investor selection. The Motley Fool's disclosure policy is a good one, gosh darn it.


Read/Post Comments (75) | Recommend This Article (83)

Comments from our Foolish Readers

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  • Report this Comment On October 09, 2008, at 4:59 PM, clorensen wrote:

    Perhaps you could explain exactly what you suggest re dollar cost averaging (per some amount of money for some amount of time, etc.) to help. Thanks.

  • Report this Comment On October 09, 2008, at 5:02 PM, FOOLBEFREE wrote:

    Tim,

    Great advice. Invest only $ you do not need in the next 5 years.

    The recession may be 2 or 3 years long, the way things are going.

    The Dow may get to 7500, the next big support level. It is now 40% below the Oct 07 peak.

    How Bad Will It Get? 7500 is just 1000 points way. Maybe we will reach 7500 next week. The Dow today closed at 8579. Today's drop was 679.

    Will it stop at 7500 , the Oct 2002 support ? With so many bad news to come, I would not be surprised to see it go below 7500. Europe has to cut another 100 basis point and the Fed another 50 very soon, like next week.

    In the mean time, yes, invest a little on the good ones that will survive a bad long recession.

  • Report this Comment On October 09, 2008, at 5:03 PM, randombanker wrote:

    I was considering rolling much of my retirement assets back into the market befroe I read this article. It seems to confirm my opinion that this is a unusual opportunity. What do others think?

  • Report this Comment On October 09, 2008, at 5:40 PM, zamorai wrote:

    With a global crash imminent and some indication that it may take up to a decade to recover the lost value of stocks, the best thing to do is prepare for the worse. Provided you have a 10 year horizon to wait out the stock market (i.e. you are no older than 50), I suggest leaving your stocks alone if they are in Blue Chip companies. Barter or liquidate any major debt and move to a lower cost environment be it the Mid West or a foreign nation like Mexico.

  • Report this Comment On October 09, 2008, at 5:42 PM, TMFMmbop wrote:

    Re: dollar-cost averagin. Figure out how much money you have to invest or how much money you can set aside to invest on a regular basis. You'll want to invest it, but given the cloudy near-term outlook, it's prudent to keep some of it on the sidelines in case things continue to get worse. Assuming a $9.99 trading fee, the smallest amount you can buy while keeping trading costs to 2% is $500. Assuming a $4 trading cost, it's $200. Move into the market at regular predetermined intervals, so your emotion doesn't get the best of your, in similar-sized blocks. If you have more money to invest, you can obviously invest in larger blocks, but don't go smaller than those. I think that's the best way to cope with a market that has lots of cheap stocks, but also keeps dropping down.

    tim

  • Report this Comment On October 09, 2008, at 7:00 PM, ArcticWaterFL wrote:

    Good advise . . . if there are any stock exchanges left a year from now. Russia suspended trading on its two exchanges earlier this week and Iceland did the same today with its one exchange.

  • Report this Comment On October 09, 2008, at 7:13 PM, 4558 wrote:

    Awhile ago someone said there was going to be another terrorist attack this year. If this stock market action is'nt a terrorist attack I dont what is. They should be investigating the possibility.

  • Report this Comment On October 09, 2008, at 7:16 PM, Redstonecollect wrote:

    If you think you should be investing long term now...you are as dumb as a door nail...the market will continue its downward plunge until unemployment starts going DOWN...this is not likely to happen for years...People can't borrow money, they will need to pull money out of stocks to LIVE ON...I emailed you people 2 years ago that the market was destined to implode...I believe we will have civil unrest and everything bad that comes with 25% unemployment...DON'T BUY STOCKS!

  • Report this Comment On October 10, 2008, at 5:08 AM, TMFSpiffyPop wrote:

    Redstone, from what I can tell, two years ago you were greenthumbing stocks up on CAPS:

    http://caps.fool.com/player/redstonecollect.aspx

    You're among the lower-rated members in our community. Not trying to call you out. Just suggesting that you put your convictions where your mouth is. If you truly believe now what you're saying, do the same thing you did back in December of 2006 -- come to CAPS, rate stocks, make yourself accountable, and let's see how you score. Fool on. --David G.

  • Report this Comment On October 10, 2008, at 8:05 AM, mtr wrote:

    TMFBreakerDave: He's entitled to an opinion. However the law of averages tell me that if we panic right now we lose big.

    Stocks over a 10 year period of time will be much higher that this panic going on.

    It might be popular to short right now but but I think it would be wise to cover immediately and start looking for the bottom.

  • Report this Comment On October 10, 2008, at 9:02 AM, SteveTheInvestor wrote:

    Investing at the "point of maximum pessimism" is an obvious no-brainer. If anyone knew when that was, we could all be rich.

    We may not have seen anything yet. A runaway freight train (the sell-off) is very difficult to stop. It either crashes and leaves a huge mess to clean up or it eventually runs out of gas after it wreaks havoc on a lot of people. We don't know what it will do.

    I'm waiting to find out if it crashes into the fuel depot and causes the entire town to burn to the ground.

  • Report this Comment On October 10, 2008, at 11:34 AM, ReillyDiefenbach wrote:

    Once again, I have to ask, where is the upside? Why in the world would I put my money at risk in the stock market when a CD is paying 4 percent? Anybody? Who is hiring right now, other than the U.S. Army? Where are home values going up instead of down? Time's up!

  • Report this Comment On October 10, 2008, at 11:55 AM, chrisjrogers wrote:

    Should I sell some of my stocks, especially my recently poorly performing ones (Amex, Oil stocks, Chipotle) and buy them back when the market bottoms out?

    So far I've lost 40% of my savings in the last year. I had $13,000 in stocks last month, now I have $8500.

  • Report this Comment On October 10, 2008, at 1:02 PM, freddyv3 wrote:

    Each of us should invest according to our needs and we should have a plan that works for us.

    For the average person who invests a bit each month it would be foolish to stop investing as dollar-cost-averaging only ceases to work when you quit buying because stocks are getting cheaper.

    For me, hedging against my business is my top priority so I am 100% short the market. If the market goes down and the economy worsens I will do okay; if the market reverses and my short position shrinks my business does okay; either way I'm covered.

    What's best for YOU to survive over the long haul? First of all, DON'T PANIC! Be courageous and stick to your plan...you do have a plan, don't you?

  • Report this Comment On October 10, 2008, at 1:35 PM, sarque wrote:

    I'm 77 years old, living on retirement investments (which are falling rapidly), a small pension & Social Security, yet I am extremely optimistic and am gradually adding to my Portfolio. I may well not live to see the really great gains but I haven't the slightest doubt that we will turn the corner and, many of us, wish we had acted during the darkest days of this period. I'm excited and risking nothing I need to live on but quite a bit of what I have saved during the recent boom years. Fools, take action or in a year or so you are going to feel like, well, you are going to feel Foolish.

    Sarque

  • Report this Comment On October 10, 2008, at 1:55 PM, mchuckie wrote:

    Even though sufficiently bloodied, down 45% in last year, down 30% in last month and a half, I remain a believer. At 61, what else am I going to do with my money. I've already determined that I will keep working another 5 years. I have taken this opportunity to rebalance my portfolio. Eliminated crappy or speculative stocks, however small, and consolidated in blue chips at what appear to be bargain basement prices.

  • Report this Comment On October 10, 2008, at 1:58 PM, cliffyworld wrote:

    For info on how it all began, read the article titled "It's Not Always The Pork. The Cows All Have To Be Fed Too." at http://www.cliffyworld.com/blogs

  • Report this Comment On October 10, 2008, at 2:54 PM, MidwestBob wrote:

    Does anyone else make money in the market like I do - buy low and sell high? Then why would anyone think buying now is a bad idea? Yes, we've all lost a lot of money with this crash. But history has a way of repeating itself. The market crashes then bounces back. A year ago it was at an all-time high. Rest assured it will again reach an all-time high. A lot of investors have pulled cash from the market. When they feel it has stabilized, much of that cash will go back into the market and prices will climb. And it won't be long... just look at the history of other crashes.

  • Report this Comment On October 10, 2008, at 3:09 PM, USAeconomist wrote:

    In the near future, there is going to be a time where we all are standing here at the bottom, looking up, looking at where we have been and be in relief it is all over. Sites like these will no longer be impacting economic news http://www.buymyhousebeforethebanktakesit.com . The dust will settle and there will be great deals to be made, great opportunities to invest in and we will all move on. It will be a time for rebuilding, working together hand in hand, and lending a helping hand. Our actions will have become a part of history. You will be able to tell your grandkids you made it through the crash of 2008 and tell them your part. Your character will be determined, did you believe on not, did you hold on or not, did you panic or not, did you ride the course or not, did you contribute or take. What was your role, what did you do to help others, what did you do to help America in it’s time of need? Your decisions and actions today are what are building tomorrow. Make sure they are the right decisions.

  • Report this Comment On October 10, 2008, at 3:25 PM, chesterfried wrote:

    I'd like to issue a thank you to all of the individual investors and portfolio managers selling off positions for no other reason than the overall market is declining. Continue the self fulfiling "run on the bank" course of action locking in those losses in a futile attempt to appease your risk intolerance. Myself and likeminded others who moved majority positions to cash and extreme short term instruments in the first quarter of 2007 when the writing on the wall turned to bold text are licking our collective lips. The truth is - the more severe the knee jerk on this - the better the story will be when we tell our kids 10 years from now how we came into this wealth. As of this moment - what has happened is triple what I expected to happen. The more the market drops the "easier" it will be to all but gaurantee those stellar 10 year returns. Also - keep selling stocks like msft which had/has an excess cash probem for years. It makes so much sense.

  • Report this Comment On October 10, 2008, at 3:40 PM, kixky wrote:

    So 60% of Americans think a depression is 'likely'. Can you tell us what percentage of Americans know what a depression is?

    Far less than 60%, I would say.

  • Report this Comment On October 10, 2008, at 3:44 PM, ashboy54 wrote:

    Gentlemen, your sage advice has been the same for the entire year I have now been a Fool: "Here are a list of companies we really like because we think they are undervalued. Buy now."

    It should be apparent to everyone here that you folks have no idea what you are talking about. The stocks I've invested in over the past year have done nothing but drop like stones, yet you continue to repeat your Foolish mantra. I suspect being a Fool for too long turns one into a lemming.

  • Report this Comment On October 10, 2008, at 3:50 PM, bonanza35V wrote:

    I am getting on in years (84) & when I first started investing, stocks were paying 5% dividends and P/E's were 10:1. Growrth stocks like IBM (then!) might go for 20:1. I think that things might well get that way again, which would put the Dow at 5000. Look out below! There are too many derivative based schemes out there. By the way, where is the "value added" in a derivative? ~ Gene Keyt

  • Report this Comment On October 10, 2008, at 3:50 PM, pythagoras99 wrote:

    Yup. You nailed it chesterfied.

    Keep sellin', folks. I can take those pesky stocks off your hands for you. Stocks are already undervalued. And if they fall more... GREAT! That's not going to change the ultimate bounce-back price, and it just means I can buy more at an even greater discount!

    Like the article says, that means you have to ease in (dollar cost averaging). If you invest all at once, you won't be able to buy more later when it goes lower. This is most easily done by investing some fixed percentage of your paycheck. If you have some chunk of cash you want to invest... in that case you have to figure out what time frame you want to spread it out over.

  • Report this Comment On October 10, 2008, at 4:07 PM, TheDash9 wrote:

    An interesting and humorous take on the current market.

    http://www.molifeney.com/content/view/111/62/

  • Report this Comment On October 10, 2008, at 4:15 PM, lerej wrote:

    commerce isn't going to cease to exsist.

    Private banks are doing great because they don't figuratively give junkies suitcases full of cash with the advice to do better next time.

    If anything i'd say just look to a time when credit wasn't available to the masses, scale it up for population growth, adjust the ratios for unskilled workers, and poof, you have a range for the bottom. Aruge all you want, I land on YOUR feet, as to not get my shoes dirty.

    the market will go back up, maybee not quick and maybee not as far (as all those ipods are on bank of america 27% cc's).

    Live within your means america, you did it to yourself.

    700 billion in oil surpluss at 77 a barrell also may have been a better strategy? Nope lets keep the monopolies going!

    math is easy!

  • Report this Comment On October 10, 2008, at 4:40 PM, alharper wrote:

    Don't cry over spilt milk. Great time to avergae down in your strong stocks. Especially dividend stocks. Gives you more capital to soften the blows you have taken. All yields are a pay back while you ride out the panic.

  • Report this Comment On October 10, 2008, at 5:05 PM, IsItFoolish wrote:

    The eensy weency spider climbed up the water spout down came the rain and washed the spider out.

    Out came the sun and dried up all the rain and the eensy weensy spider went up the spout again.

  • Report this Comment On October 10, 2008, at 5:08 PM, lerej wrote:

    IsItFoolish - BRILLIANT!

    as someone once told me

    don't turn your paper loss into a real one.

  • Report this Comment On October 10, 2008, at 5:09 PM, kkgoh wrote:

    Dollar cost averaging?! For crying out loud, that's a mutual fund strategy, usually applied with your constant 401k or retirement contributions (since it makes sense there due to regular contributions). Why the heck are you even mentioning that here? Stop posting IRRESPONSIBLE articles like these.

    These are stocks with more inherent volatility. If you want to buy at a cheaper price, here's a better idea:

    Wait till it gets to the bottom, then buy it there.

    Next question, where's/when's the bottom?

    When every other Fool (and general market) has bought into it, producing a plausible turnaround or established a base with strong technical reversals.

    So don't catch it right at the bottom, but you have the comfort of the market buying with you to produce strong trends. Chances are you're better off than someone who tries to dollar cost average all the way to the bottom. There's another name for that: its called doubling-down.

    For all the fundamental folks out there, I'm a strong believer too. But I also believe that there's a time and place for every strategy, and trying to play contrarian by buying when everything is heading south is like catching a falling knife.

  • Report this Comment On October 10, 2008, at 5:14 PM, kkgoh wrote:

    "don't turn your paper loss into a real one"

    This is a classic statement of denial.

    Guys, a loss is a loss, paper or not.. Whether you realize the loss or not doesn't change the fact that you have now less money than before.

    ashboy64, great observation about how all recommended stocks have been plummeting.

    Just fyi, I respect all the recommendations that the Fools make, and these are great fundamental picks. In fact, I still look to them for ideas. But this isn't the time to be buying as and when a Fool recommendation comes out. The unfortunate thing is that the Fools never placed the "caveat" or list what their expected price range is for a stock.

  • Report this Comment On October 10, 2008, at 5:20 PM, normsd wrote:

    It will get worse before it gets better, just look at this month's freefall chart.

    All that money pulled out is going to be slow to come back, and not until the economy and unemployment and credit availability improves.

    It's going to be a long, slow recovery no matter what the govt. does. Public confidence ia near the bottom, and will not return until at least Nov. 3 and maybe long after that.

    When it does return, look for stocks to take a rocketship ride, so get ready.

  • Report this Comment On October 10, 2008, at 5:47 PM, TEXAS33 wrote:

    Don't attempt to catch a falling knife.

  • Report this Comment On October 10, 2008, at 6:09 PM, stan8331 wrote:

    I don't see why anyone who believes that paper losses are the same thing as real losses would ever invest in the stock market in the first place. It only takes a very cursory examination of history to realize that booms and busts are an inherent feature of our markets. We clearly need better financial regulation, but if you go too far in trying to eliminate the possibility of crashes you end up with a market that goes perpetually sideways. For anyone who doesn't believe they're smarter than Warren Buffett, dollar cost averaging into good companies that have been steeply sold off is a strategy that has historically provided excellent returns.

  • Report this Comment On October 10, 2008, at 6:21 PM, afganpicker wrote:

    i was thinking about 3-5 thou a month for the next yr. Too much to little?

  • Report this Comment On October 10, 2008, at 6:24 PM, rwk2008 wrote:

    60% of Americans blah blah blah. As has been well documented, 60% (or more) of Americans believe the Bible is literally true, believe in Noah's flood, believe in the near-term rapture into heaven, believe that angels watch over them etc. Don't take your financial advice from these people!!!

    Good advice - invest at the bottom. Now, who can tell me when the bottom comes? My take, when the market (DJIA, etc.) stabilizes in a relatively small range for at least a month, it's probably a good time to evaluate. If the general signs look positive, it may be a time to buy. When things are fluctuating wildly, nobody can tell what the next direction will be. This week, it's all panic selling, next week, it may be panic buying!!!

  • Report this Comment On October 10, 2008, at 6:25 PM, VladLondon wrote:

    I think is the correct moment for take the risk. I am young, no married, no children. A relatively good job and i can invest £50 every month.

    I don't have anything to loose.

    Too much for learn, and i think this is a good place for learn from the old sea-wolves. Good financial wisdom, i have found here.

    Cheers.

  • Report this Comment On October 10, 2008, at 6:31 PM, afganpicker wrote:

    BAC. EXM. BQI. and some miners any other ideas?

  • Report this Comment On October 10, 2008, at 6:33 PM, smlltwnboy wrote:

    I'm a new Fool in fact this is my first post.  I'm glad to see that most of you understand that its a good time to buy, but in my opinion it is almost always a good time to buy, it just depends on what you're buying.  Am I the only one who loves options and inverse ETFs, or maybe CBEO's VIX volitility index or the options you can buy on it. How about options on foreign markets.  In a market as volitile as this an option collar is almost always going to profit. You can always make money in the market with the technology we have today.  I'm actually up 57% this year(thanks to doubling down/$costaveraging), as of market close today, after sustaining some heavy losses over the last week. Maybe MF is against those risky strategies though, I am new to this community.

    Next, in my opinion its a horrible time to put your money in a 4% cd, not to mention Treasuries yielding under 4%, when inflation is over 5%, isn't it?  Or how about the suggestion some people had to wait for the numbers to change, like unemployment or even manufacturing numbers and retail sales numbers.  Isn't the stock market a leading indicator?  All of those numbers described are lagging indicators.  I know for a fact that the market will have left you way behind if you wait for the lagging indicators to swing up before you buy.

    Well I guess thats all for my first Fool post.

    Oh and props to stan, the Oracle knows whats up!

  • Report this Comment On October 10, 2008, at 7:51 PM, SilverMoney wrote:

    When the Dow Jones hits 1,000 that will be the point of Maximum Pessimism. Mark my words (or rather Alex Jone's) on that. If you don't follow the internationalforecaster.com you need to, your future may very well hinge upon it.

  • Report this Comment On October 10, 2008, at 7:56 PM, JesterWOCourt wrote:

    ashboy54: 1 year? Give it time. Have you done a calculation to see what The Brothers' returns are if you hack off the past 1; 2; 3 and 4 years of their Stock Advisor newsletter (has TMF done that themselves?)? Every recommendation made brings down their advertised average... you need time before those go up. Not to mention - you haven't noticed the entire market is down, have you? I ignore (screen out) 90% of their recommendations - I can do this because what I don't ignore with each newsletter is the education therein. It's impossible for each recommendation they make to fit your value screen, style, investment thesis, portfolio, etc.

  • Report this Comment On October 10, 2008, at 8:00 PM, 5048 wrote:

    Look - the P/E for the S&P 500 gets down to 7 or so in panic sell-offs. Right now it's at 15. So the S&P 500 has to go down to like 500 before this thing turns around. That's the number we used to see before the tech bubble started to form in early 1995. The housing bubble is the mother of all bubbles so the S&P 500 might even fall farther.

  • Report this Comment On October 10, 2008, at 8:36 PM, Frogtree71 wrote:

    chrisjrodgers: in answer to your question....leave it in and buy more as you get more cash (but diversify)... the bottom may well have been today.

  • Report this Comment On October 10, 2008, at 9:17 PM, bpa169 wrote:

    I think it interesting that someone making all the comments that he has has no money invested in anything that he talks about. Keep investing fools, when the market is up or down....or don't you know that?

  • Report this Comment On October 10, 2008, at 9:39 PM, JesterWOCourt wrote:

    @bpa169: Interesting how? Would you rather he pitch you stocks he owns that don't illustrate his point? Look up "conflict of interest". He never said he doesn't own any investments at all. He is "investing... when this market is up or down". In fact, he alludes he may even buy one of the companies he's talking about ("...yet"). Wow. And, wait, did they use data from Morningstar? Oh, don't get me started on that conflict of interest. *sarcasm

    Snide comments aside, yours included, there is an abundance of companies made mention of even without TMF employee ownership. Read the disclosures at the bottom of articles to see how ordinary it is.

  • Report this Comment On October 10, 2008, at 9:56 PM, bobfmdc wrote:

    I have been reading Motley Fool Friday emails for 10 or so years. Originally they were useful. Now they are platitudes and advertisements for their proprietary products. Useless. Cancel my subscription.

  • Report this Comment On October 10, 2008, at 10:14 PM, cliffyworld wrote:

    Please read related article titled: "It's Not Always The Pork. The Cows All Have To Be Fed Too." at http://www.cliffyworld.com/blogs

  • Report this Comment On October 10, 2008, at 10:17 PM, sgtsquarepants wrote:

    I'm working extra shifts to get extra money right to buy buy BUY! There are SO many bargains out there right now. I know things are tough but I'm EXCITED about the future. I've gotten in to some EXTREMELY awesome stocks.

  • Report this Comment On October 10, 2008, at 10:48 PM, LadyRo wrote:

    Probably not smart, but have been unwilling to look at the decline of my portfolio and therefore not making any moves at all...no buys, no selling. Trying to remain hopeful and at some point take a chance to buy something at a lower price???

  • Report this Comment On October 10, 2008, at 11:00 PM, MinoaMike wrote:

    So I've lost 14% of my retirement fund and IRA's. But I'm still okay and I'm not going to sell in panic. Thats what brings the market down. Stay the course, don't sell. This is your country, don't destroy it by killing the market place of capitalism.

  • Report this Comment On October 10, 2008, at 11:14 PM, TheVoice101 wrote:

    Octoberfaith...What a load of codswallop. Can you please restrict yourself to adding meaningful dialogue to the discussion, or perhaps you could go and busy yourself with housework, or wash the car or something!!

  • Report this Comment On October 10, 2008, at 11:21 PM, TheVoice101 wrote:

    Some very interesting and diverse views here. The challenge now is with so much diversity is what to actually do? I have used a mainstream broker, and despite me flagging a market concern back in August they have continued with a sit a finesse type strategy. I have now watched my portfolio drop 45%, and theyr'e suggesting that disappointing a it is, I should just wait it out and things will come back. I just need to be patient. Is this good guidance?

  • Report this Comment On October 11, 2008, at 12:09 AM, kkgoh wrote:

    I don't get it.

    Why are there views about "selling in a panic", "having courage", etc? If it makes sense to sell when the stock is moving against you, then you have to sell. That's not panicking. That's the appropriate response.

    Nobody is suggesting that you sell and NEVER buy it again (which I'm sensing seems to be the inherent assumption). You're selling now to prevent further losses, and when it looks good, hop back in.

    How much of a premium are you willing to pay for peace of mind and confidence that what you buy will net you money? Even if the stock quickly bounces back to where you sold, you lose what, $10-$15 in commissions? Compare that to the amount that you could lose/lost. And its not like the stock will make incredible gains against you in a single day/hour when you're not vested. Holding stocks that are clearly going down in expectation of future gains is the silliest argument I've ever heard.

    It really pains me to hear so many sob stories about people losing their shirts (30%, 45%, etc etc) and still holding on. I don't mean to sound rude, but aren't you just "hoping" that everything will suddenly be right with the world and your stock price will bounce back to breakeven levels? How realistic is that?

    smlltwnboy made a good point about adopting different strategies (he called it risky) depending on the market. I don't think they are that risky if its appropriate and the signs (technical and economic fundamentals) all point in that direction. This may be very hard for some people to swallow, especially when they're accustomed to only making money when the market goes up. I hope you find the wisdom for what is right for you (again depending on your own portfolio, risk, and familiarity with different trading strategies). If all you know is trading in the up direction, then don't try to play when everything is going down. To quote an old and perhaps cliche saying, "If the only tool you have is a hammer, every problem looks like a nail".

  • Report this Comment On October 11, 2008, at 12:13 AM, bobs111 wrote:

    In October 2007 my portfolio was 70%

    stocks and 30% cash, now it's 70%

    cash and 30% stocks, and I did it without making a single trade!

  • Report this Comment On October 11, 2008, at 3:29 AM, bigb3200 wrote:

    No bubble. No bottom. It's the end of empire and no conventional strategy will work. If the comment by USAEconomist above is referring to a time 40-50 years hence when a greatly diminished population looks back at these times to reflect upon how they somehow held on by their fingernails while all and everything collapsed around them, ok... But those people won't be living in anything resembling the present US of A, and there won't be stock markets (oh, a handful of superwealthy elites will still be able to exchange ownership of vital resources-- water, grain, "human capital"-- in their own private clubs but it won't be the kind of market where the common man can "invest" in anything.)

    My advice to anyone who truly believes is to keep buying all the way down. In fact, you should buy real estate as well. (Not land, houses, big new houses in the deep burbs...) Leverage yourself to the hilt to do it. If you truly believe then this is the test of your faith.

    As Wile E. Coyote has demonstrated time and time again, when you run off the edge of the cliff, you only fall when you look down; until you do you can hang suspended in mid-air. So don't look down. And keep buying Acme until you finally catch that rascally roadrunner, you know it's only a matter of time, right? Right?

    See you dancin' in the ruins.

  • Report this Comment On October 11, 2008, at 5:12 AM, HELLOSCOTTSDALE wrote:

    I tried the dollar cost averaging routine with Washington Mutual a few years ago based on a Motley Fool recommendation and now they're gone. I think US treasuries are a better bet. You may not get rich but, at least you'll have enough for cat food in your retirement years.

  • Report this Comment On October 11, 2008, at 9:45 AM, bekindanice wrote:

    Im not real intelligent. And I dont quite get 75% of what was posted before me...but on aug 29th the banker handed over my inheritance and it wasnt due 3 more years. I handed 100,000.00 to my moms financial advisor...7 days down to 90000.00 At the time it was up and down I emailed them and said 10000 was all I could afford to lose mentally. up and down and talked into the longterm very easily and greed and bellysoft now its out 30000.00 with no more left over to reinvest as it goes down

  • Report this Comment On October 11, 2008, at 10:15 AM, usellubuy wrote:

    I think the one thing America has always been good at, is the one thing we are not doing presently. Consuming and spending! Some of us have prepared for our futures by having read and listened to the words of God. We have chosen to invest our monies wisely. When others were telling us how foolish it was to pay off our home, we did it ANYWAYS! When others told us to bankrupt out of our debts, we chose, instead to work out payment plans and pay them off! When told we were foolish to make a pantry and fill it with items that we would need, we did it anyways. When people rolled their eyes and sighed while I checked out in the supermarket with coupons, sales ads and all my saving techniques to fill my pantry with nutritious and good food for my family, I ignored them and did as I had been directed. When others started printing money without "In God we trust" I knew the end to our financial soundness was just hours away and put money in my home safe and began to save my cash for pertinent purchases, and not big screen tvs and IPODS. When I look around and see the pure greed and foolishness that has been going on for years, while I, myself, have been listening to God whispering in my ear to not follow, I have listened to Him that created me. Where is my God now? Right here with me, advising me on His words of financial soundness that is not based on MAN, but on His sound principles and cautions. If you want out of this mess, demand our money be printed with "In God we Trust", practice sound financial principles, stop spending your money foolishly, save some, spend some, be not a borrower or a lender, stop thinking you don't need God! He hasn't made this mess, MAN has. And if you don't think that greedy men listening to the Devil speak is not at the very center of all of this, then you truly are fools and will rue the day that you did not make a choice while you still could, to follow God and His ways! God bless and keep you all till we meet!

  • Report this Comment On October 11, 2008, at 10:48 AM, bekindanice wrote:

    hanging in for the long term and I am 51 and not employed Dont quite understand how it benefits me to let it lose 20000.00 more.... In my mind it looked better and still does to have cashed it out and reinvested 90000.00 when it did its thing and leveled out

    butsomehow the people who do this all the time think its better to do this hanging in there.....I have lost not lost my humor but it has turned a little sarcastic.....given the choices we have to elect for president theres more at stake here along with the money worries....

  • Report this Comment On October 11, 2008, at 10:52 AM, cellofool100 wrote:

    For info on how it all began, read the article titled "It's Not Always The Pork. The Cows All Have To Be Fed Too." at http://www.cliffyworld.com/blogs

    Democrat bashing at it's best. Let's come together - do we really need more bashing? hasn't the bashing of the market been enough?

    I'm a small investor - are you ready? A mere $50 a month on my teachers salary.

    But it's steady. I research thru the MFAdvisor and have built a diversified portfolio that has done VERY well. Am I stopping now? NOPE.

    I've followed MF advice. I have very low credit card debt, I live frugally, I have a garden (in the city), I "can" my excess vegies, I buy what I need with cash or go without.

    America needs to learn a new way of living. Stop buying every new gadget that's advertised. Share with your neighbors-reuse instead of throwing away and fool on.

  • Report this Comment On October 11, 2008, at 11:50 AM, URDFoolish1 wrote:

    kkgoh has the right idea. A wiseman once told me to evaluate any stock trade decision in light of current circumstances. Would you buy a stock today at its current price based on what you know about the stock and the environment? If yes, buy or hold... if not, sell. It takes a lot longer to walk up the hill than it does to roll down it. btw; who the heck is OctoberFaith and why is he (she) wasting our time with his (her) inane commentanty?

  • Report this Comment On October 11, 2008, at 2:51 PM, MFnoebro wrote:

    Genius is a bull market...or is it? Most of these stories (some from fellow teachers!) ring true for me back in the day when I was on the the Street and I so believed in Modern Portfolio Theory and fundamental investing...this hogwash makes perfect sense when everyone is making money. MPT and the normalized distribution of returns is obviously the wrong way to have viewed risk in the market, and some of you have been absolutely hammered by following the advice from the chattering class, the likes of Cramer, CNBC, etc. who peddle this crap ("You, too, can invest just like Buffett!). Do your wallets a favor and get a good night's sleep to boot: check out FGLSX, the only trend following L/S mutual fund in Lipper's diversified group. It plays in just 7 ETFs, (US stocks and bonds, EAFE, the dollar, commodities) and stays in harmony with what the market is saying by going short, flat or long each asset class on a weekly basis. It totally stayed out of trouble all this year with only 1/3 of the market's volatility, and will no doubt catch the trend back up if and when this market finally turns. Enough of trying to pick stocks - they all go up in a bull market, even the dreck, and they all go down when stuff hits the fan, even the best of them. Why fight it??

  • Report this Comment On October 11, 2008, at 4:45 PM, Classof1964 wrote:

    The issue of whether to sell out and buy back seems to over look the data that shows if you are out of the market a very few days you will lose a considerable upside gain. I understand this to mean that just as the market goes down in large lumps, it leaps back in the same large amounts in a short period of time. The real question as pointed out is whether you need the money over the near term.

    Also there has been no mention of reinvesting dividends. If Jeremy Siegel is correct (The Future for Investors) a surprising large percentage of gains in stocks since the 1920s have been made by reinvested dividends. It is like another form of dollar cost averaging in equities you think enough of to already own.

    These days where stocks like AT&T (T) and GE are paying 6-7% dividends, one might consider buying companies like these in the first place for the dividend and secondly for the capital gain that is likely to come down the road, whether it be five years or whatever. Other companies rated by Value Line as A in financial strength with solid businesses and future growth potential are paying 3-4% these days. It is worth remembering that on average stocks since the 1920s have returned in real terms about 8%.

    The discussion makes it clear that no one has yet figured out how to time the market so that another investment strategy might be to look for a solid company paying a good dividend not likely to be cut at a price you can live with, for example, trading at a 2003 level while it has doubled its revenues in the last five years.

  • Report this Comment On October 11, 2008, at 7:46 PM, MyKidsFuture wrote:

    You all are forgetting about the gorilla in the room - DERIVATIVES! Banks, Governments, Hedge Funds and the like are knee deep in them to the tune of $700 Trillion worldwide. Remember Barings Bank, Wisconsin State Investment Board, the Asian Crisis, Enron, Fannie Mae & Long Term Capital Management? The G7 can't print enough money to stop this cascading crash. Buy GOLD and hold on.

  • Report this Comment On October 12, 2008, at 12:41 PM, neohiobiker wrote:

    Maybe sir John did make a boat load of money buying 1$ stocks in 1939 BUT the market collasped in 1929 . Thats 10 Years and his dollar stocks didn't start to make him money until after the start of WWII and longer. SO this Market decline could and might last a Min. of 15-20 years

  • Report this Comment On October 12, 2008, at 2:53 PM, andypratt wrote:

    Hey Everyone

    I've got some great music on the web! Blessings...

    Andy Pratt

  • Report this Comment On October 12, 2008, at 4:09 PM, quixel wrote:

    On October 10, 2008, at 6:24 PM, rwk2008 wrote:

    60% of Americans blah blah blah. As has been well documented, 60% (or more) of Americans believe the Bible is literally true, believe in Noah's flood, believe in the near-term rapture into heaven, believe that angels watch over them etc.

    Dude seriously where do you get you facts from? You sound like a disciple of Keith Olbemann... Even of the many people i know of that are really religious,even they think the bible is a guide to live by not a literal translation.I think you have some bigotry issues towards others that don't think or look like you,kind off like Obamaman or Olberman...kind off the same thing.Seigg Heillllllll

  • Report this Comment On October 12, 2008, at 9:24 PM, IB1FOOL2 wrote:

    TO USELLUBUY, I REALLY APPRECIATE THE TRUTH THAT YOU

    ARE POINTING OUT. I WANT TO ADD

    THAT CREDIT CARDS, CONSUMER

    FINANCE SUCH AS PAYDAY LOANS,

    CASH ADVANCES AND SO FORTH

    SHOULD OF NEVER BEEN PERMITTED IN THIS COUNTRY.

    THAT KIND OF BORROWING FOR

    AN AUTOMOBILE JUST BECAUSE

    SOMEONE WANTS IT OR A VACA-

    TION IS CONTRARY TO THE OLD

    KING JAMES BIBLE. WHATEVER

    HAPPENED THAT IT IS NO LONGER

    A SHAME TO BE IN DEBT SOMEONE

    IS UNABLE TO PAY BACK BECAUSE

    OF FOOLISH SPENDING.

    NEEDLESS TO SAY I DO NOT

    DO CREDIT CARDS OR CONSUMER

    SPENDING. I HOLD NO MORTGAGE

    BECAUSE I PAID MINE UP A COUPLE

    OF YEARS AGO. CREDIT CARD

    COMPANIES AND OTHERS LIKE

    THEM ARE NOTHING BUT LEGALIZED

    CRIMINAL ACTIVITY. AND BY THE WAY THAT IS THE SAME REASON

    MORE IS NOT IN THE HANDS OF

    CHRISTIANS TO GIVE. KEEP THE FAITH BROTHER OR IT MAY BE SISTER.

  • Report this Comment On October 13, 2008, at 9:19 PM, kkgoh wrote:

    classof1964,

    Great point that "if you are out of the market a very few days you will lose a considerable upside gain". I've seen similar research that shows a majority of the gains were obtained within a few days of holding the stock.

    I'm a believer that if you truly monitor your stock well, you can capture a majority of those gains. You don't have to stare at your screen 24/7. Occasionally checking back and looking for technical signs of a breakout will be just as helpful. Few major gains are ever made without a precursor - whether it be earnings reports, news, speculation, etc. And these will usually be reflected in the price charts.

    More importantly, setting stops and protecting yourself should be the key rather than staying in the market and hoping than a multi-bagger will land on your feet. Placing yourself at risk in the pursuit of such elusive gains is something no professional trader does, so why should an amateur?

    Professional traders usually go in with the mindset of minimizing losses. With a firm trading plan, profits will come in the long run. And yet, I'm starting to think that a majority of individual investors/traders (including myself) become enticed by the Warren Buffett stories and discovering the long-term 10-20 bagger. I would argue that is akin to playing the lottery - a one time bet with little/no active management along the way.

    And the funniest thing is this:

    After today's (Monday) huge rally, investors will start to feel safe again. They'll start holding long positions, dreaming of the incredible upside they'll make having finally discovered a "bottom". They will, given time, forget the catastrophic losses of Oct 6-Oct 10, 2008.

  • Report this Comment On October 14, 2008, at 10:26 PM, mauiwave wrote:

    No matter who is elected...nothing will change unless the powers that be in our government collectively pull the Federal Reserves corporate charter. The Fed is a private company with private investors who do not have to disclose their identity. Ben Franklin, Thomas Jefferson, James Madison, and the other founders of our country left England due to the privatization of Banking. The Fed is no longer benefiting the American people but is hurting us as a collective whole. The Fed has no "Reserve" It lends our government 10x what they have on hand and charge the government interest.....that is why the IRS was created so we the people can pay the private bank its interest rate charged to the government to fight its wars, give grants, and everything the government buys or wants, the deficit will never go away.....DO SOME RESEARCH PEOPLE.....OR SHOULD I SAY SHEEPLE.....watch this video and get educated to the root cause of the nations economic woes

    http://video.google.com/videoplay?docid=6076118677860424204

  • Report this Comment On October 17, 2008, at 10:37 PM, cliffyworld wrote:

    Please read the related article titled "Joe the plumber gets flushed to Nottingham" at http://www.cliffyworld.com/blogs

  • Report this Comment On October 17, 2008, at 11:51 PM, markwg1 wrote:

    In my opinion, companies' revenues and profits cannot go up indefinitely... so it's a waste of time to use the strategies "buy and hold," "P/E," "Book value" in stock markets to buy stocks.

    Best examples: if you invest in stocks like GM, F, GE, YHOO, C, BAC, WB, WM, LEH... 10 years ago... today's returns are less than 5% even some stocks like LEH went bankrupt and GM falling to its 1960s level.

  • Report this Comment On December 24, 2008, at 1:43 PM, futbolbob wrote:

    Watched BQI for a while. Finally bought at 1.27, then at 1.03, then again at 0.80. Just sold at 0.65. It is my own fault for riding this dog down but with such a glut of oil on the market and the extremely consistent direction this stock is going, why do so many of you value it so highly? I realize it may regain value in 5 yrs but I can't watch my investment fall to zero to wait years for it to recover. Of course I bought high and sold low with Ford as well so maybe this is a sign for everyone to jump on board and take advantage of my black thumb of death regarding stocks.

  • Report this Comment On January 08, 2009, at 10:46 AM, robertf36009 wrote:

    Riding the fall isn't preety while things are still on the way down. I bought Intell (INTC) starting at $18 and have been purchasing more at intervals as the price came down. Same with F5Networks (FFIV) starting at $18 which has been up and down so I havn't hedged as much. Started Sprint at $6 and recently made a large purchase at $1.80. We shall see if this pans out long term. I am going to initiate a position in Hana Biothech (HNAB) soon. While the PE and debt service don't look good the three new preperations in it's pipeline look very good if your willing to speculate on a penney stock.

  • Report this Comment On January 20, 2009, at 8:14 PM, drewdwyer wrote:

    Why are these comments so old?

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