Q4 2008 13F

[stahleyp]

You said :I'd also say that there was much, much higher risk in 2009 than in the early 80s. There wasn't much talk about a Great Depression.

 

I was just saying that if you were in the market in 1980 there was a big risk. It wasn't a depression risk it was hyperinflation that can make your real return negative even if you made 15% on your stock. I just want to tell that when you were in the market in 1980 or in 2009 it was not easy to convince you that everything will work well in long term.

 

Ten years after it is easy to tell how easy it should have been. For a great opportunity to exist you have to have a lots of peoples exiting the market. If this happen it is because the perception of a high risk is the sentiment of the majority. You have to be able to ignore it to invest heavily during these period.

 

I think people were too emotional about "hyperinflation". Was there a chance it could happen? Sure, I guess. Was it likely? No. A quick search says that hyperinflation is 50% per month. Did anyone really think that was likely? Heck, did people think 1/10 of that was likely? If TARP wasn't approved, there was a fairly high likelihood of another Great Depression. There is always some risk in the market. There was risk in July 1932 in March of 2009. Things can always get worse. If there wasn't risk, there wouldn't be opportunities!

 

I will say that since I wasn't investing (or breathing) in 1980, it's always good to get perspective from someone who was around back then so thanks for that.  :)

[MarioP]

I think people were too emotional about "hyperinflation".

 

It is always when people are too emotional that there is great opportunity. Those emotions make them act irrationally. Yes there is risks at those moment but they are not as big as people think nor it is widespread. You have to keep tour head cold and be greedy but not too much  ;) What I learned is to buy sure things at those moments that can double in 3 years not the things that look the most profitables if every things goes the way I think it will...cause that never happen.

 

The best examples of going for the sure things is the 2008 deals preferred share deal of Buffett. To make it profitable the company has only to survive no thrive. We don't have access to this kind of deal but the idea is there : try to protect your downside. Buy solid company that are less than 10X profit and hope they will go back to 15X. Don't buy (like I did in 87) companies losing money that you hope will turn around and make you 10 baggers.

 

Be greedy when other are fearful

Think by yourself

Don't let emotion runs your portfolio

 

All phrases that we hear often but that easier said than done.