Don't let it get away!
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Man, did I get some grief for an article I wrote recently.
As you'll see if you click through and read it, my point was pretty simple. In a nutshell: There are good stocks that have been beaten up with the rest of the market. If you want to sell the stocks you have and get into better position for the eventual recovery -- and maybe make some money in the near term via dividends -- now's an excellent time to do that, before big-pocketed bargain hunters start pushing prices on the best businesses back up again.
I didn't think that was a particularly controversial idea.
But geez, from the emails I got, you'd think we were having some sort of global economic panic or something. Apparently, now is a terrible time to buy because it could get worse and the market might go down further!
I won't argue with either of those things -- they're both true. But as objections to doing any investing at all … I think that's panic talking. Here's why.
Yes, it could get a lot worse
It is certainly true that things could get even worse from here. One or more of the U.S. automakers could collapse, which would cause great pain for everyone from commodities shippers to "Tier 1" suppliers like Goodyear Tire & Rubber and Johnson Controls.
Mighty institutions, foundations of the American economy, seem to be in danger. Dark rumors and signs of doom stalk General Electric (NYSE: GE ) . Citigroup … I don't need to tell you about them. Even Berkshire Hathaway (NYSE: BRK-A ) (NYSE: BRK-B ) , the very model of a triple-A rated credit for so many years, has come under intense selling pressure on worries about an option transaction -- worries that are unjustified, says Fool analyst Alex Dumortier, and I agree.
But there's still plenty to worry about.
Yes, the market could go significantly lower
It could. A sober-minded analyst I greatly respect thinks that the S&P's ultimate bottom could be around 600 -- another 25% down from here -- if certain factors in the economy break in particular ways. Maybe even lower.
That would be ugly. But here's the thing: This isn't going to last forever.
Really. It isn't.
Some of my emailers seem to think that things are going to get worse and worse (or at least no better) for 10 or 20 years or more. But the stock market isn't going to go to zero, the U.S. government isn't going to collapse, and -- while I won't be surprised if its current rally flips at some point -- the dollar isn't going the way of the post-World-War-I German mark.
But the perennial doomsayers who insist that America and the dollar are doomed unless we greatly increase manufacturing and exporting to "pay" for our "consumption" miss something huge: America is already a major exporter -- of ideas.
Why we're not going down the tubes
Companies in several Asian countries make components for iPods and iPhones, but the design, the innovation, the idea for the thing in the first place came from -- and the lion's share of the profits return to -- Apple (Nasdaq: AAPL ) headquarters.
Which is in California. And those profits are in dollars.
Sure, many cell phone makers are headquartered outside of the U.S., and their profits return to Korea or Finland or wherever. But consider the global giants whose ideas drive other industries, and whose money is ultimately counted in dollars -- Microsoft (Nasdaq: MSFT ) , Dell, Pfizer (NYSE: PFE ) , even troubled Ford, which remains a significant and successful player in European and Latin American markets. How about all of the global revenue generated by the ideas owned by, say, Lucasfilm or Marvel Entertainment (NYSE: MVL ) ? All those earnings come home to America.
You get the idea. American innovation isn't the one and only "motor of the world" as it arguably once was, but it's still an enormous driver of global business. And I firmly believe that the ideas born of that innovation are products of America's unique culture -- and will reassert themselves in years to come.
It's a recession. It's bad, and it could get a lot worse. But it will pass. The markets will rise again. And when they do, the stocks you buy at discounted prices now will bring you a lot of dollars, too.
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