Fear And Panic Usually Marks A Bottom
The Dynamic Wealth Report
October 13, 2008
Are There Any Sellers Left?
Just this morning I was driving into the office. The stop and go
traffic was nothing short of normal. My to-go coffee mug was full and
the sun was starting to break above the hills. That’s when I heard a
really interesting comment from the radio announcer. “Up next, this
industry’s doing well in tough economic times. Stay tuned for more
details.”
My ears perked up – they had my attention . . . I wasn’t about to go
anywhere.
I just had to wait for the end of a long line of forgettable
commercials. If you’re anything like me, you’re always interested in
learning new things. Especially when it’s something new about business
or the markets.
You never know where a great investment idea’s coming from.
That’s why I’m always listening to the financial news network on the
radio. It doesn’t matter if I’m driving up to the corner market, or
across the state. The financial station’s the first one I turn on. If
nothing else, I at least get a good gauge on the current market
psychology.
Finally the commercials ended – I couldn’t wait.
Then they went to a quick market update. You’ve got to be kidding!
Finally, the radio host put on his guest. It was a locksmith.
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No offense to the locksmiths of the world, but I was a bit disappointed.
What inside knowledge about business or the stock markets am I going to
gather from a locksmith? Then I started listening to the interview and
that’s when I realized something . . .
The locksmith was pretty interesting.
He commented on how business was booming. No, more people weren’t
locking themselves out of the house. It was the other part of his business
that was
off the charts. Selling and installing safes. Small ones, big ones, it didn’t matter. They were flying out of his shop
faster than he could keep them in stock. The really interesting
part was that his customers were not businesses - but individuals.
Driving his business – mistrust in the banks.
More and more of his customers were concerned about their banks failing. They knew they were insured, but people felt safer with a bunch of cash
at home. They didn’t want their money tied up for weeks as the FDIC
sorted out what money would be made available.
The other issue driving the business was one of crime.
As the economy softened, several customers mentioned being afraid of
rising crime in their neighborhoods. It’s believed that crime and the
economy are inversely correlated. Simply as the economy falls, crime
goes up. A better economy means less crime. These customers wanted their
important possessions to be safely locked away.
It doesn’t seem like much, but I made an important realization during
this interview.
Fear’s moved from the traders on “Wall Street” to the everyday person on
“Main Street.”
It’s not just the big central bankers concerned about our economy and
financial system. Our neighbors and friends are starting to get
concerned. People who normally don’t follow the markets are starting to
follow it.
This is a big indicator.
There’s a famous story about Joe Kennedy exiting the market shortly
before the 1929 collapse. He sold because his shoe shine boy was giving
stock tips and knew the latest news on the markets. He figured if the
shoe shine boy was buying stocks, there was nobody left to buy.
I’m putting that theory into practice here . . . only in reverse.
It seems everybody’s afraid of the markets. Heck, people are afraid of
their own banks. You can’t visit a local Starbucks without listening to
a conversation or two about how much money someone’s lost. All the news
is focused on how horrible the markets are, and how much worse it’s
going to get.
Everyone’s been selling, and I don’t think there are many people left to sell.
I know it seems odd, but this tells me the worst is almost over.
Don't be surprised to see the market put in a bottom sometime this quarter and
rally toward the end of the year.
• Brewers
(up 4%)
Looking back at industry performance from the start of the year,
something really interesting jumps out. Only one industry is up, and
that’s the Brewers industry. The group is lead by Anheuser-Busch (BUD),
which is set to be bought by InBev before the end of the year.
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