March 13, 2008
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 January 20, 2006
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’)
“Someday 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.