Wednesday, September 17, 2008

Greed and Fear

"Greed is alright, by the way." -- Ivan Boesky, 1986 commencement speech, Haass School of Business

"Greed is good." -- Gordon Gekko, Wall Street

Don't worry, I'm not about to turn this blog into some type of stock-picking site.

And for full disclosure's sake, my ability to trade (or at least to acquire) is halted until I put on my next set of bars, thanks to some current budgetary restraints (for which I blame neither the Republicans nor the Democrats but, rather, myself for taking on my mortgage in addition to other fixed expenses).

Anyway, I want to return to an old adage I've heard about investing:

"The key to successful investing is to be fearful when others are greedy, and greedy when others are fearful."

It's this type of mentality that distinguishes the greats like Warren Buffett and Peter Lynch.

I know I'm just echoing what I said two entries ago, but fear is now the prevailing emotion in the investment world.

If you have the means to invest, and the guts to do it, now is the time to be greedy. Now is the time to scoop up well-established stocks that have taken huge dives in the past week.

Grab what you can, hang on for a while, and just when the tickers start turning from red to green and those very same people re-enter the market, liquidate your positions for nice gains.

3 comments:

Nick said...

GP--

I totally agree that fear now dominates the investment world.

Actually, fear has become a dominant force in so many other parts of our lives. Irrational or unwarranted fear, and the fear of fear, have paralyzed and debased our school systems, our relationships, our communities, our marketplaces, our religions, our press, our politics, and our culture.

This is a loaded and fascinating topic--I'm so glad you brought it up.

-Nick

The New Englander said...

Nick,

Glad to hear you feel the same way on the fear stuff, and the way it matters for things far outside of the investment world, too.

My way of *countering* that tide is just to not buy into it -- to leave my house unlocked sometimes, to ignore the labels on food, to not give a rip about second-hand smoke, to not obsessively use Purell, etc.

It's funny when people call that type of stuff "naive" when in reality, I'd rather live my life that way and take the risks that come with it than become some type of life-a-phobic germ control/climate control freak.

I'm not a parent yet, so I really can't say how I'll be, but I hope that someday my kids are coming home with grass stains on their knees and some scuffed-up elbows.

It seems like that type of stuff doesn't happen anymore..

-gp

Chris said...

There are many reasons why FDR will be remembered as one of our greatest presidents . . . what I love most about FDR was that "Freedom from Fear" was one of his four-pillars (the others being Freedom of Speech, Religion and Freedom from Want). He was the one, after all, who famously said "We have nothing to fear but fear itself."

One objection though: I think looking at food labels is a great idea . . . the labels are highly useful in avoiding "unhealthy" food, which to me is anything with too much salt or sugar . . . we're lucky the law requires manufactures to use the lables because it's amazing what they put in some [processed] foods . . .