Market of Sad Pandas

Today’s front-page headlines:

Think the Economy's Bad? 'You Haven't Seen Anything': CNBC, US

Shares fall of Greek deficit fear: BBC News – Business, UK

Markets take a turn for the worse: Financial Post, Canada

Wall Street drops as Greece overshadows ISM data: Delhi Business Standard, India

Is it just me, or is this constant vacillation between panic and complacency getting a bit tedious? I mean, seriously, it's been going on for 3 years now.

Everyone who reads this blog knows that the Chinese market is overbuilt and due to crash. Everyone knows that Greece is in trouble, and that European countries supporting Eastern European countries will suffer contagion. Everyone knows that the US economy is still in the tank, and although holding its own (and I would argue, poised for a comeback) will nonetheless remain there for some time. None of this is news. And yet, people are“reacting” to this news by selling their stocks - again.

Not that I am complaining, exactly. I love it when people sell their stocks at low prices, because I like to buy them. Canadian resource companies are my current favorite, since the chart for virtually every one of them has the shape of an inverted ‘V.”

No, this does not mean that I am suddenly one of those chart-wielding soothsayers who use terms like “reverse head and shoulders formation” or other such nonsense. It just means that no entire sector of a profitable industry deserves to be priced so low. Of course, this was one of my predictions in a previous article (The Fortune Teller), and I am now taking full advantage.

As one wonderfully sarcastic writer commented on a financial site today: “I would recommend you panic.”

Panic and fear are an intelligent investor’s best friends, as long as you watch but do not partake.  Don’t be a sad panda.

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"One must not let oneself be overwhelmed by sadness."

Jackie Kennedy

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From www.urbandictionary.com

Sad Panda, noun:

An unhappy, disappointed person. The phrase can be traced back to an episode of the cartoon South Park, in which the "Sexual Harassment Panda" teaches the children what is and isn't sexual harassment.
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Musings about the Debt Crisis

The market activity of the last week has been nothing short of amazing. It wil, no doubt, provide fuel for several year's worth of analysis by investment psychologists. Consider these amazing facts...

1) The Debt Debate. For almost two weeks, the U.S. government debated spending measures to reduce the deficit. After they had reached an agreement, the markets crashed (see my earlier post, "The Market Gets Ugly," for a full explanation).

2) The Downgrade. Standard & Poors downgraded U.S. debt, meaning that S&P feels the probability of the government defaulting on its loan obligations is now higher. As a result of this downgrade and the subsequent market crash, investors... (wait for it, this is really good) bought hordes of U.S. treasuries! That is, they escaped the crisis of a U.S. debt downgrade by buying into the safety of U.S. debt.

3) Scapegoating and Fundamental Attribution Errors (forms of logical fallacy) in the media. Pundits are taking to the airwaves to say that the crash would never have happened, if only they been in power. This includes Sarah Palin and Donald Trump, whose opinions almost symbolize rhetoric over logic. Investors, demanding an explanation for what they cannot understand, are listening to anyone who seems to have one.

4) Ignoring Statistics. Just as they do on the upside, emotional investors are now completely ignoring fundamentals. There are many profitable companies in the U.S. that are once again trading at low single-digit P/E ratios! The average investor is looking at the equivalent of a $.10 slice of homemade apple pie and saying, "I'm sure not eating that s**t!"


I have to admit, I'm finding this all terribly fascinating. And I love buying stocks that others are throwing away.

Fear is here.

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"If stupidity got us into this mess, then why can't it get us out?"

Will Rogers

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