Good article from Business Week.
"What is the individual investor trying to save for retirement to make of all this? The patterns of market history are such that stocks are sometimes seen as diamonds and bonds as zircon, and vice versa. Benjamin Graham, the investing legend, wrote in his 1949 masterpiece, The Intelligent Investor: "In the old legend the wise men finally boiled down the history of mortal affairs into the single phrase, 'This too will pass.' Confronted with a like challenge to distill the secret of sound investment into three words, we venture the following motto, MARGIN OF SAFETY."
Diversification is one way to build a margin of safety. It's a hoary lesson oft forgott. The Talmud recommends it: "A man should always keep his wealth in three forms; one third in real estate, another in merchandise, and the rest in liquid assets." Shakespeare in The Merchant of Venice has Antonio explain to his friends why he wasn't spending sleepless nights worrying over his investments.
"Believe me, no. I thank my fortune for it,
My ventures are not in one bottom trusted,
Nor to one place; nor is my whole estate
Upon the fortune of this present year.
Therefore my merchandise makes me not sad.""
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What could happen; what if we have hyperinflation at the same time? What would the real value of the Dow Jones be then?
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Meantime, Ben Bernanke gets up in front of the Council on Foreign Relations this morning (quick, look surprised) and begins by saying:
"The world is suffering through the worst financial crisis since the 1930s, a crisis that has precipitated a sharp downturn in the global economy. Its fundamental causes remain in dispute...."
Remain in dispute? (Is he kidding?) Too much debt, excessive leverage, malinvestment and a lack of regulatory oversight seem pretty obvious to the public. That and the lack of responsiveness from our so-called 'representatives' when calls and emails run 300-to-1 against bailouts. What's to dispute? The crooked trading desks lost their asses when the quant-models blew up and the publics taking the old 'bend-over' on it. What's to dispute?
But don't get me started. That's the lay of things this morning: I figure I can get some projects done around the house and out in the shop while I wait for the rest of the world to come to its senses. So "Bully for Tuesday!" Financial reality is being reframed before our very eyes.
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Interesting...I wonder why we don't hear about stuff like this that much
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