$700 Billion.

Massive commercial paper purchase agreements.

½ percent rate cut.

Well, looks like we went swimming with those band-aids on, and now they’re floating in the pool. Following bailouts and bailout proposals, buyouts and rate cuts, investors themselves have decided to bail out. The S&P is down 42% from its high exactly one year ago yesterday.

You know how sad things are? I didn’t have to elaborate on any of the first three fragmented sentences of this article. You knew exactly what I was talking about in each case. The government has thrown everything it’s got (and some things it hasn’t) at this crisis, and investors are kicking it all to the curb.

Here’s my advice: buy stock in a company that has the fan-cleaning market cornered, because the s*** has hit it. There’s excrement everywhere, and we’re running out of mops.

Sell the rumor, slaughter the news

According to the items I initially mentioned, it would seem as though we (and by “we” I mean the brilliant minds who helped get us into this mess, not literally you and I) are doing all sorts of great things to help the economy recover.

But something’s not adding up. Uncle Sam is talking to himself, forgetting the recent past, and generally showing all the signs of dementia. After all the stops have been apparently pulled out, the market continues to bleed profusely from every orifice.

It all comes down to something intangible. Something that can be manipulated, but is too delicate to completely control: Confidence.

Or, in our case, lack thereof. According to recent events, there is no confidence in our government, the market, or that anyone in a suit is telling us the truth – and Bernanke, winner of this year’s “least appealing job” award, is sweating through his like Bruce Pearl in the 4th quarter.
 
Now that the rug has been pulled out from under us, I’m not going to talk about how much further it’s going. In my opinion, we’re falling down stairs into a dark basement and are just hoping to feel the cold concrete floor below us.

Instead, I will look to some words of advice from a smart, rich old man.

Past returns are no guarantee of future – or current – competence

“If past history was all there was to the game, the richest people would be librarians.”

Warren Buffett, in my opinion, is as proficient at expressing succinct, accurate observations as he is at investing.

For so few words, a tremendous amount of insight. Almost as much as these:

“A public-opinion poll is no substitute for thought.”

Preach on.

The recession that our country finally (and only recently) accepted has given way to the public’s quiet whispers, soft conversation, and cautious hints at the D-word.

Yeah, let’s talk about that for a minute.

First of all, only about 5% of the current population was alive during the Great Depression, much less being old enough to remember it. Less than 0.1% are old enough to give real insight as to what it was like to invest, trade, work, and live during that time. So cut the crap about this being just like the Great Depression, because most of you weren’t there.

The market was not the same, the world was not the same, and until we have 25% unemployment, shut the hell up and quit creating drama for the sake of your own amusement or because you ran out of things to write about.

I am by no means implying that we, as a nation, are in a great economic situation. We’re knee-deep in it, as I alluded to at the beginning of this article. However, I am getting bombarded with e-mails, phone calls, and in-person panic-stricken meltdowns, courtesy of average investors drawing their own conclusions based on what they heard on the radio or what Suze Orman may or may not have said about their 401k.

Someone asked me yesterday, “when do you think the turnaround will be?” The pure idiocy this question demonstrates left me no choice but to stare blankly and say, “never”.

Hearing the flood of common investors spewing their guts on web blogs, television shows, and other media vehicles, it has become apparent to me that everyone perceives himself as an expert, and it is wearing thin on my patience – it’s not fair to those investors who know they don’t know and are actually looking for guidance. In fact, it has drawn me into a realm of disgust and condescension that I have not visited in quite some time.

If you’re selling right now, please sell it to me.

First, a confession and – more accurately – a disclaimer: I’m buying. I won’t tell you what, I’ll leave that to other sections of our web site.

A few weeks ago, I explained that with every downtick in the market, my grin gets a little wider, and I’m going to buy a little more. Well, I’m doing just that, and I’m doing it with a smile on my face.

Let me borrow, edit, and customize a quote from the late, great, George Carlin:

“Think about how stupid panicked the average person is, and realize that half of them are even stupider more panicked than that.”

I also mirrored the thoughts of John Templeton, which was that the best time to buy is during times of maximum pessimism. It’s not getting much more pessimistic than this.

So, I will offer the same advice that I give those dear friends who ask: If you’re still in it now, look at the upside and downside to selling. The market will not go to zero. Bold prediction, I know. But honestly, I firmly believe that if you’re still holding a bag, you have dealt with most of – not all – but most of the pain already.

John K. Whitehall
Analyst, Oxbury Research