While looking for ideas for writing a spooky article for this month’s newsletter I thought I had found something really scary: The Dow Jones Industrial Average. Eeeek! So I stared into the face of this terror, and got into the spooky spirit of this all-hallowed-holiday and started writing a bone chilling article about the end of the economy. Chaos in the streets, martial law, dogs and cats sleeping together! But then a real party-pooper came along and canceled all of the festivities of fright and started turning on the lights. It was Warren Buffet.
It turns out that this wet blanket was cautious about the market when everyone else was
having a celebration. His entire personal portfolio was in Treasury Bonds, not in the stock market at all! Now that everyone is scared out of their wits in the stock market what does he do? He calmly walks in and starts converting almost all of those Treasuries to stocks! Doesn’t he know that the stock market just dropped 36% from its all time high of a year ago? Oh…wait a minute.
"A simple rule dictates my buying: Be fearful when others are greedy, and be greedy when others are fearful," said Buffett. "And most certainly, fear is now widespread, gripping even seasoned investors."
I suppose he must have seen how disappointed he had made the partygoers who were dressed up as stockbrokers and financial analysts. He then threw them a bone by saying: "In the near term, unemployment will rise, business activity will falter and headlines will continue to be scary." But before the DJ could start playing “The Monster Mash” he sobered up the crowd again by saying: "Fears regarding the long-term prosperity of the nation's many sound companies make no sense. Most major companies will be setting new profit records 5, 10 and 20 years from now."
This article isn’t scary at all! Especially when it comes to real estate! Everyone needs a place to live, so that even when times are tough housing always doubles in value (or more) every decade. That’s including the busts that occur almost every decade like clockwork. Even when I find an article that is really trying to be scary like: “Housing starts hit record low”, I can’t even get a little chill. Even the dimmest economics student knows from their “Supply and Demand 101” class that when you decrease inventory, but increase population, you have a housing shortage. So when the current overstock of inventory has sold, normal demand and reduced supply will drive prices up. This is still good news for the homeowner and real estate investor.
Perhaps I never really got scared on Halloween anyway. Now that I think of it, I come to the party for the fun outfits, the silly games and for the people. I hope I haven’t let you down this year. For those of you who really need the fear and the terror to really enjoy the holiday there’s
always CNN.
