This has been a very rocky period for investing. We remain
as focused as ever on our portfolios. With that said, we are all bombarded
about financial stresses every day from the media. Our firm remains in
touch with these stresses and events. We are all hearing about the concerns
of the Fed, Bear Stearns rumors, Citigroup and so forth. I felt this would be an
excellent time to share with you this very quick discussion called,
"The Wisdom of Great Investors."
Typically our portfolios are invested in well financed and
balance street strong companies. We are certainly having rocky roads, yet as
anyone invests with us knows that our mantra has been to "buy when there is
blood in the streets." The link above discusses that mantra, and the value of
long term value investing. John O'Shaughnessy, CPA reminded me of this
wonderful quote which is contained in the link above, "You make most of
your money in a bear market, you just don't realize it at the time."
Shelby Cullom Davis.
We believe that capitulation is starting to appear in the
markets. People who have known me for a long time, probably have heard me use
this term. The following is a quote from investopedia on capitulation. "In
the stock market, capitulation is associated with "giving up" any previous
gains in stock price as investors sell equities in an effort to get out of the
market and into less risky investments. True capitulation involves extremely
high volume and sharp declines. It usually is indicated by panic selling.
After capitulation selling, it is thought that there are great bargains to be
had. The belief is that everyone who wants to get out of a stock, for any
reason (including forced selling due to margin calls), has sold. The price
should then, theoretically, reverse or bounce off the lows. In other words,
some investors believe that true capitulation is the sign of a bottom."
We believe that for a long term value investor that long term
profitable opportunities are being presented to us during these difficult
periods. We do think that pain will be felt along the way. Here is an
excerpt from our January 2006 letter, "We would welcome a market drop in
the same fashion that a skier welcomes the winter snow. We hope that you all
will be able to tolerate the psychological difficulties of bear markets."
You can read that letter at this link
Those of you who know me well know that I am a great admirer of
Warren Buffett and Bruce Springsteen. They are both mentors of mine. I was
trying to think of some Bruce Springsteen quotes that would pertain to this
climate and here are a few I came up with.
"The Daily News asks her for the dope. She says "Man, the
dope's that there's still hope"." (From 'Does This Bus Stop at 82nd St?')
"It's rainin' but there ain't a cloud in the sky. Musta
been a tear from your eye. Everything'll be okay. Funny thought I felt a
sweet summer breeze. Musta been you sighin' so deep. Don't worry we're gonna
find a way. I'm waitin', waitin' on a sunny day. Gonna chase the clouds
away. Waitin' on a sunny day." (From 'Waiting on a Sunny Day')
we'll look back on this and it will all seem funny." (From 'Rosalita')
Of course there is nothing funny about the state of the
economy, the markets and the difficult emotions involved. I just thought
sharing some of his quotes would be appropriate for the times we are in.
Throughout my life, I have looked to the art of "The Boss," for inspiration,
answers and advice.
Again, please contact us with concerns or comments. We would
like to hear from you.