So since my last BUY note the markets have plunged an additional 8%. I am convinced that the majority of this sell off is the result of fear, not the result of fundamentals. However, this is a very scary time.
A year ago today, the markets were at an all time high. I called my broker and told him I wanted to sell all of my mutual funds. I thought then that the market was overheated. He told me to calm down, that I was young and that I needed to ride the waves of the market to come out ahead in the long run.
I didn’t sell.
Since then the market has gone down 40%.
There are two truths in this story: 1) Always go with your gut. 2) The market will go up and down but over the long run you will make money. This is almost as hard to see today as it was for the folks watching their life savings disappear in 1929 and the early 1930’s. But as The Intelligent Investor pointed out just days ago, those who bought stocks then made a ton. While, our situation today is different (it is not as grave, and the recovery will not be as great) the wisdom on Benjamin Graham holds true.
Deals like these only come around once a century.