Monday, October 13, 2008

Time to buy?

Anyone know what's going on in the markets? There has been a global market downturn, a lot of countries stock markets have been plummeting and causing nervous investors to pull their money out due to fear of losing value. In the US a lot of baby boomers have money in the stock market and baby boomers are getting ready to retire so it is likely a lot of them have pulled cash out to preserve they money they still have so they don't hinder the retirement plans too much.

Every time you turn on the TV or you open up a financial news website it seems as if they are discussing how much worse the market can get and how much value each of these companies can continue to lose. Is that the right way to be looking at what is going on? As Warren Buffett would say, you want to be greedy when others are fearful and fearful when others are greedy. The one issue with that is: is it too soon? Has the market not bottomed yet? Will it continue to lose another 20 or 30%?

Its obviously a very tough decision to make, but Warren Buffett has invested, over the past 3 weeks or so, billions of dollars into at least 3 companies (GE, Goldman Sachs and Constellation Energy). He has an awfully good track record of investing so it may be a good idea to follow his lead, but at the same time, can you risk the market going into a further downturn?

This fear can change peoples points of view on money. This could scare them into realizing that they don't have enough money in emergency savings (if they even have an emergency fund). They can begin to realize that they shouldn't be in this position and they do not want to ever let it happen again, and they change there spending habits, so that instead of not saving any money each pay period, they now want to save 10%, well, where is that 10% coming from...they have to cut costs somewhere. My point is that people may stop spending or may cut back on spending their discretionary money, so there may be a lot more businesses that could be effected but it may not show until they release numbers with the lower cash flows taken into consideration.

It may very well be a time to buy, but be cautious because as you've seen with the market it can in any direction very quickly.

No comments: