Tuesday, November 11, 2008


I am no expert but I expect the economy to get worse, quite a bit worse, before it gets better, not because of Obama but because the usual indicators seem to be pointing that way. I came across this wise commentary today, however, that reminds us that the stock market is not the same as the economy.

The stock market discounts future economic events. Right now it is discounting economic decline that will not take place for months. Financial stocks have been declining for over 16 months, and the U.S. market as a whole for 13 months. Yet, if you believe the Government's economic statistics, the economy was growing through June.

Many stocks could fall further over the next several months or years in our opinion. Financial stocks will be among them. However, some stocks are so cheap that they deserve to be bought, even though we expect further global macro economic problems. In such an environment, many assets become priced too cheaply, and the wise who have husbanded their liquidity, will have the capital to buy greatly undervalued assets.

That is good common-sense advice, spoken plainly.

Because I am investing much of my disposable income in my children's education, I do not have liquidity to buy undervalued stocks, but hopefully you fellows do.

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