Is this Financial Armageddon? Warren Buffet, show us the way!
I’ve been watching and reading CNBC, Bloomberg, New York Times, Paul Kedrosky and everything else I can get my eyes on. And I think I’ve figured it out!! NOBODY knows what’s going to happen with the economy. It’s a very unsettling time. I actually feel like I’m staying up to date with developments of the bailout, the elections and the extreme depth of the problems the world faces as a result, but they’re not providing me with any conclusions.
I do, however, have two fundamental beliefs:
- The economy will recover at some point (1-5 years)
- Investors make the most money when they buy low and sell high.
So am I making is this just too simple? Is the “Buy low and sell high” doctrine just too obvious to really work? With the dow closing at 9447 today, I think we can all agree, that we’re in a buyers market. Take Warren Buffet and JP Morgan for example. A New York Times article, Like J.P. Morgan, Warren E. Buffett Braves a Crisis, calls Warren a “Profitable Patriot”. The biggest fortunes in the world’s history have been made in times like these. But investors are also human, and fear does often override this basic common sense logic. The smartest investors are the ones who can put their fears aside, and invest long in companies now, when valuations are low. By the time these companies are ready for a liquidation event, the markets will have returned. I still find it very puzzling how some long term investors (like Angels and VCs investing in private startups) make investment decisions based on short term indicators. Ron Conway is one of the more respected Angel investors, and I take the message that he’s sending out to entrepreneurs as a pragmatic warning of my very point.
“I would tell (entrepreneurs) to keep their day job until they got one year of funding, and if they couldn’t get that, then they’re not meant to start that company right now…. My advice to (start ups that don’t have a year’s worth of money in the bank) would be to raise money by reducing your own spending. If you can’t raise more money, you have to cut costs. And that’s what I’m harping on to my companies.”
Vancouver’s own Lyal Avery had some pretty insightful words to say in the comments: