Friday, October 10, 2008

Knock Mr. Market there?

If you have been reading my blog over the last two years you know I am an investor at heart. I like real estate. I like stocks. I like to make money.

Let's be honest with each other, the last month has been full of gut wrenching twists and turns in the stock market and there is no liquidity for investors or developers to buy land or distressed assets. It seems as though even foreign money has left US investment markets.

If you watch the news all you see is everything wrong with the world, financially and otherwise. Remember September 11? Remember when the dow sank to 7600 in 2002? Remember the RTC (the predecessor to the 700B plan we have now)? No doubt about it, things look as bleak as ever.

On the other hand, we are still here right? We are still free citizens and we have our families. I would like you to realize not all is as bad as it appears.

As I write this blog on Friday morning, the dow started the day with a 500 point drop. Sounds like we are going from bad to worse...
Yet, at the same time, some banking stocks are RISING. Imagine that, some financial stocks are being purchased when EVERYONE knows the banking system is the last place you want to be right now.

Again, not everything you see and hear is as it appears. As I read what I have written I realize I do not have anything of substance to point to, other than the past 100 years, that proves things will get better. An investor named Benjamin Graham proposed a philosophy about investing that he called "Mr. Market". I want to talk about Mr. Market a bit here because I think it helps to put the stock market and the real estate market into perspective. Here is a direct link to a site that talks about Mr. Market in detail (

Essentially Mr. Market is a crazy fool that shows up on your doorstep every business day to make you an offer for your stocks or other investments. You can choose to listen to him or slam the door in his face. Either way, he will not be offended and will be back tomorrow to make another offer. Some of his offers are insanely high while other offers are incredibly low. Oh, I left out one important fact, Mr. Market is crazy. In fact, you would be wise not to listen to him at all!

Would you go to an insane asylum for advice on investing? Hell no! If you own a quality investment feel free to listen when Mr. Market offers a great price. However, please realize just because Mr. Market is offering you a high price does not mean your investment is worth that much. Sometimes you are better off to sell when the crazy man offers you a price that cannot be justified.

The point I am trying to get across to you is the market IS crazy. Yeah I feel like dirt too when I see one or all of my stocks being traded for less than what I paid for them. I am sure you do too. If you invested in some penny stock(s) you may never see your money back. There are many stocks, thousands of them in fact, that are down because of fear. I bought a stock for 9.30 that pays 1.87 per year in dividends. That stock is now trading at 7. I think it will be bid up in price over time (at least I hope it will) but until that day, I still get a 20% dividend every year.

Take a look yourself. There are great companies that make real money and pay real dividends for crazy (low) prices. At some point soon we will see a bounce off the lows we are seeing this week and surely into next week too. By bounce I do not mean the dow will be at 12,000 by Halloween but the market will recover. There will be some catalyst (I have no idea what it will be) causing the market to move back up.

Remember, Mr. Market is crazy and should not be consulted on value issues. Keep your chin up, try to stay positive and spend some time with you family...unless of course Mr. Market is a member of your family...

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