Now May Be the Time to Really Buy

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As long as financial markets have existed, they have been subject to cycles of fear and greed. These cycles' specific causes are always different, but they always come down to one simple variable -- confidence in future economic growth. For investors (as opposed to traders), the most important concern is not the inevitable cycles, but the underlying trend.

At present, the forces driving global economic growth remain strongly positive, owing primarily, I believe, to a series of societal revolutions. The capitalist revolution has unleashed what Keynes called the "animal spirits" of entrepreneurs all over the world, most dramatically in Asia. The technology and communications revolution -- driven by great companies like Intel (Nasdaq: INTC), IBM (NYSE: IBM), Cisco (Nasdaq: CSCO), Yahoo! (Nasdaq: YHOO), and Google (Nasdaq: GOOG), to mention just a few -- continues to generate new products, new services, and higher productivity. The life sciences revolution is in the early stages of redefining health care as we know it, and the financial revolution has made capital available to entrepreneurs virtually anywhere in the world.

If you have been listening only to the self-serving, attention-seeking chatter of the media (and certain politicians) -- financial crisis, economic crisis, war, natural disaster, epidemic, terrorism, greed, injustice, corruption, pollution, and so on -- you might be surprised to learn how much progress the world has actually been making.

According to a recent report from the United Nations entitled "2007 State of the Future," the world is becoming:

• Healthier. Average life expectancy rising from 48 for those born in 1955, to 73 for those who will be born in 2025.
• Wealthier. Literally hundreds of millions of people have lifted themselves out of poverty within the past 30 years, with world poverty likely to be cut by more than half between 2000 and 2015.
• Wiser. Illiteracy has dropped from 37% in 1970 to less than 18% today.
• More democratic. The number of free countries grew from 46 to 90 over the past 30 years; 64% of them are electoral democracies.
• More connected. The number of people connected to the Internet is more than 1 billion, and rising rapidly.
• More peaceful. Warfare around the globe is in sharp decline, compared to previous decades.

Much, if not most, of this progress reflects a global awakening to the power of economic freedom.

As recent events in the financial markets demonstrate all too dramatically, there are certainly still risks, problems, and challenges. Even the largest and most resourceful participants in the financial services industry, like Bear Stearns, Goldman Sachs (NYSE: GS), Wachovia, Bank of America, (NYSE: BAC), Merrill Lynch, and JPMorgan Chase (NYSE: JPM), have learned that the hard way. But it will take something much bigger than the recent liquidity crisis, which began with mortgage-related securities and credit default swaps -- i.e., insurance policies on the ability of companies to pay their debts -- to overcome the powerful forces that continue to drive global wealth creation.

To paraphrase the late management guru Peter Drucker, what is happening in the world today is not as important as the Industrial Revolution -- it is far more important.

We at The Motley Fool are continuing to invest, because we recognize that this latest crisis, too, shall pass. We know that history has shown time and again that investors who had the courage to buy excellent companies during times of panic have realized substantial gains. As Warren Buffett said again recently, "Be fearful when others are greedy, and be greedy when others are fearful."

If you're looking for superior stock ideas that we think 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.

This article was first published Oct. 13, 2008. It has been updated.

Bud Morten is a member of The Motley Fool's Board of Directors, and does not own shares of any companies mentioned in this article. Google is a Motley Fool Rule Breakers recommendation. Intel is both an Inside Value pick and a Motley Fool holding. Bank of America and JPMorgan Chase are Income Investor picks. The Fool has a disclosure policy.