What’s the capital of Iceland?

A: About €3.51.

Although Gianluca reminds us not to try to catch falling knives , I am definitely a buyer in these markets. This has not been a traditional bear market so far — which are normally characterised by weak rallies and gradual slow downs — rather than intense plunges like the ones we’ve been experiencing in the last few weeks. The rallies that follow bear markets are often quick, so without trying to time the bottom, it’s actually good to get in when there’s blood on the streets. I don’t reckon I’ll be making a quick profit, but in five or 10 years, I do think these will look like bargain prices. Buy from the fearful and sell to the greedy.

I saw some great credit crunch jokes posted on Facebook (thanks Manos!) and they’ve all made me laugh e.g.

“Q: What’s the difference between an investment banker and a large pizza?

A: The pizza can still feed a family of four.”

Some recycled lawyer jokes too:

“Q: What do you call five hedge fund managers at the bottom of the ocean?
A: A good start.”

Since I know a couple of hedge fund managers, I have to admit I don’t really subscribe to this one. I find it peculiar that the media portray this as something different from that which has always happened. It’s just another bear market. 90% of my net worth is in funds from Dimensional Fund Associates who are very dogmatic about leaving your money in the market to do what it does best. They have produced a great presentation showing just how similar the current market is to others problematic times in the past, and how similar the media’s presentation of it is too.

I have been doing some research into a trend following market timing approach, that seems to work very well over the last 30 years, but having just my moved my money over to DFA a couple of years back, I wanted to continue the research until I fundamentally change my approach — again. Most investors get killed not from bear markets but from pulling their money out at bottoms and putting it back in at tops. I don’t intend to change my approach until everything is locked and loaded. And having said that, the greatest benefit of a market timing approach comes predominately from missing big downturns — and this is one of the largest across a variety of asset classes.

Hey ho, let me leave you with another one: “Overheard in a City bar: ‘This credit crunch is worse than a divorce. I’ve lost half my net worth and I still have a wife.'”


Tags: , , , , , , , ,

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google+ photo

You are commenting using your Google+ account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )


Connecting to %s

%d bloggers like this: