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Friday, October 10, 2008

Sunday OCTOBER 12 Reality Check Part II: Lessons from Horse Race Gambling

Good Morning. We go back to work tomorrow. So let's review one more time...

Horse race gambling rule #4: Scared money don't win.

When next week roles around there are going to be some great values around. Look me in the eyes and tell me this is not a full-blown financial panic like you read about in the history books. It is. The sell off has little to do with fundamental analysis and everythig to do with panic. Bank of America at $19? Sign me up. JP Morgan led by Jamie Dimon at $38? Order here! Petroleum stocks clobbered...I'll have some of those too. And I will buy with confidence because I have done my handicapping for myself (horse race gambling rule #1) and I am confident in my analysis. I don't buy equities with scared money.

And neither should you. If you don't have the guts to ride out market volatility then you should not have been here in the first place. And if you want to get back in but are going to worry about it, then you are playing with scared money and are going to lose.

But for those of you out there who want to make some plays and cash, now is looking like the time. If the market tanks to 5000 then who cares anyway.

2 comments:

Anonymous said...

I think people are overlooking what the government is trying to put in place during this crisits. Although things have accelerated downward, the scope of government activity is a sharp contrast to the initial response during the 1930s, when it took the U.S. government more than three years to address a widening banking and economic crisis. Investors should understand that the U.S. government is not repeating the policy mistakes of the Great Depression, and that its actions represent part of the solution that should eventually stabilize confidence, the financial system and the economy.
Treasury $700 billion rescue package to inject capital
into U.S. banks in return for an equity stake in the
companies and hopefully restoring confidence in the health of financial institutions.
Interest rate cuts by at least 12 central banks around the world, including coordinated easing on
October 8, 2008, by major economies including the
U.S. Federal Reserve and European Central Bank.
• Massive government intervention in the European banking system, including the expansion
of bank deposit guarantees and direct capital injections into major banks in several countries.
• A new Federal Reserve facility to directly purchase commercial paper, in an effort to supply
short-term lending to companies who are struggling to fund their operations as a result of tightened credit conditions for short-term funds
I seems to me like Investors are overlooking the fact that action is being taken and it will help tremendously...they miss the next run up in stocks.

Andrew_Grodner said...

Well, it seems that there is something like "bear market rally" and we may have not seen the bottom yet (as of Oct. 13). Here is an interesting recap of 1929-1933 bear market as it is related to 2002 market, but it may have relevance for what happened today.
http://www.ameinfo.com/16529.html