Sunday, October 4, 2009

It is the Darkest Just before Dawn

Perhaps you’ve heard it before –“it’s the darkest just before dawn.” This phrase is used to describe the hope that is coming after a period of hopelessness. Times where it seems the world is ending; where fear paralyzes the masses and stops them in their tracks while the masses, like sheep, follow their “fear sheppard” to the wolves.
I’ve can’t recall the last time I woke up to watch a sunrise. So I don’t know if the phrase it literally true or not. A simple Google and I’m sure I’ll discover it isn’t. But it’s the meaning of the phrase rather than the legalist accuracy of the phrase that matters.
Today, people are uncertain about the future of their personal, as well as the country’s, economic future, stopping people cold in their tracks from making investments and spending money.

I say it is this very time that smart people recognize the opportunities and seize them. I say when it appears to be the darkest, it is time to buy; it is time to invest. Back in March 2009, the stock market looked like it was headed to bottoms that haven’t been seen in more than a decade. The whole nation was paralyzed. The “fear Sheppard” was out in masses and the masses where following the Sheppard. People panicked. People sold their stockholdings. It seemed the darkest.

But had one bought stock at that time, they’d be looking at 60-100% profits or more. I happen to have lived during the 1987 stock market crash known as Black Monday. That day in October the stock market dropped 25% in one day. It has never dropped that much in one day before or since. To equate that drop into today’s market, that’d be like shaving 2,500 points off the Dow Jones in one day.

Even during the darkest of times in earlier 2009, the Dow only fell 800 points or so in a day. So in October 1987 it was very dark comparatively speaking. Of course, today there are far more complex dynamics playing into the market demise. Had one bought in October 1987, they’d be very wealthy today despite the recent drop in stock prices. But in hindsight it was the best time to buy.

I believe this basic philosophy of buying when all others are petrified in stone by the current situation will result in great wealth being created in the future. I believe in not following the crowd, but rather going against the crowd. When the crowd starts buying, then you ought to seriously think about selling. And when the crowd starts selling or stops buying, you ought to think about buying.

So watch the crowd and go the opposite direction and you can’t go wrong in the long-run.

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