Embrace Your Inner Spock: Three Questions Investors Should be Asking

Congratulations, you’ve just lived through the sixth-worst day in the history of the U.S. stock market. The Dow Industrials fell 634 points on Monday in response to Standard & Poor’s downgrade of the United States’ credit rating, and two days later the volatility continues.

After a day like that, it’s important to step back and get a little perspective. When you see the world around you crashing down, it’s natural to panic. But ask yourself the following questions:

  1. If the United States is now a bad credit, then why did bond investors run to Treasuries as the market was selling off? The yield on the 10-year Treasury note is now near all-time lows. This suggests that bond holders are not the least bit worried about getting their money back. If bond investors aren’t worried, then why are you?
  2. Why is it that Warren Buffett — the most successful investor in history — brushed off the S&P debt announcement and considers stocks to be attractively priced?
  3. And how are stocks “risky” when some of the biggest and most widely-held names — such as Sizemore Investment Letter recommendations Intel (INTC), Microsoft (MSFT), Johnson & Johnson (JNJ), Procter & Gamble (PG), Altria (MO), Philip Morris International (PM), Diageo (DEO), and Unilever (UL), to name a few — now pay out more in dividend yield than the 10-year Treasury does in interest?

When you do your homework and you choose your investments well, you don’t have to worry at times like these. In fact, if you have extra cash at your disposal, you use them as a buying opportunity. That’s what the all-time great investors do.

Long-time readers have no doubt heard me mention the name Albert Meyer, who manages the buy generic viagra no prescription Mirzam Capital Appreciation Fund (MIRZX). I consider him one of the sharpest accounting minds in the business. I’m also not entirely convinced that he’s human; I suspect that he is a refugee from planet Vulcan, home of Star Trek’s Spock.

Meyer has that certain personality quirk that tends to be prevalent in successful value investors: order viagra canadian pharmacy A total lack of emotion when it comes to the investment process. He dissects a company’s financial statements with the detachment of a surgeon in the operating room. When he determines that a company is a bargain, he buys it; if he determines that a company is expensive, or if he finds its accounting practices questionable, he avoids it, no matter how popular it is.

He also has a second personality quirk that is common to virtually all successful value investors: An ability to tune out the constant stream of noise coming from the media. Meyer, like me, reads the Financial Times religiously. But unlike me, who compulsively has to read it every morning with my coffee, Meyer reads a weeks’ worth of newspapers at once, usually on a Saturday when the market is closed. Oh, and he doesn’t own a TV. (“It’s mostly all rubbish, anyway,” is his rationale, spoken in his professorial South African accent. He’s correct on that count.)

Right now, I’m going to recommend that we play it cool like Meyer. If you are comfortable with what you own — and I most certainly am — then don’t let a wave of hysteria over a meaningless credit downgrade cloud your judgment. You sell when your reasons for owning an investment no longer hold true, not because of a volatile fear-based decline. Continue to collect the dividend checks and add to your positions as your funds allow. You’ll sleep better at night. And when the dust settles, you’re likely to walk away from all of this a lot richer.

Charles Lewis Sizemore, CFA

Sizemore Insights is a free service of Sizemore Financial Publishing LLC, publisher of The Sizemore Investment Letter, a monthly subscriber-only newsletter.

reputable canadian online pharmacies SUBSCRIBE TODAY to Sizemore Insights and get access to information that is simply not available anywhere else.

Disclaimer: This material is provided for informational purposes only, as of the date hereof, and is subject to change without notice. This material may not be suitable for all investors and is not intended to be an offer, or the solicitation of any offer, to buy or sell any securities nor is it intended to be investment advice. You should speak to a financial advisor before attempting to implement any of the strategies discussed in this material. There is risk in any investment in traded securities, and all investment strategies discussed in this material have the possibility of loss. Past performance is no guarantee of future results. The author of the material or a related party will often have an interest in the securities discussed. Please see Full Disclaimer for a full disclaimer.

, , , ,