Saturday, November 22, 2008

Where is the Smart Money??

We have recently been focusing on the rapid downward spiral in prices and have had some very good discussion. In my quest to find out what many of the best in the business think about the deflation/inflation argument I have found one common denominator. THE BEST IN THE BUSINESS ARE BEING PATIENT. AND MANY OF THEM ARE BEING PATIENT FROM THE SIDELINES. I am always willing to analyze my own thoughts and seek to find out where I am wrong. I am beginning to believe that I discounted one major part of the de-leveraging process. When we talk about de-leveraging the mainstream media makes it sound like hedge funds sell after redemptions come in and they are "panic selling" and the market action appears to support that. Further analyzing the situation we must remember that many hedge fund managers are brilliant individuals and good business people. Have the good ones raised much more cash than necessary to weather this storm? Were they content to sit on cash while the economic crisis unraveled? The great ones raised cash and are smart enough to know that this market is being driven by panic and fear. They have the capital and the patience to find really great entry points. If you know you have the capital to stay in the game you don't find yourself fighting emotions. We all know that the worst trade/investment you can make are the ones where you are emotional as opposed to rational.

My best advice? Utilize this time of turmoil to roll up your sleeves and do your own research. Ryan Krueger, whom I consider to be one of the best in the business recently wrote in an article that "RESEARCH AND HOMEWORK MIGHT START MATTERING AGAIN"
Words of wisdom that give me a guide to what I should be doing. What does a 500 point move that seemed to be based on the announcement of that the future Treasury Secretary tell you? That keeping your money safe while doing your research and waiting for a little more clarity is a pretty good idea.