Friday, July 25, 2008

High Stakes Gambling

Steve Lamp has some thoughts on stocks:
So earlier this week, I think it was Tuesday night, I couldn't sleep, and I was thinking about all of the dour economic news that kept pouring across CNBC at work that day. Stocks were getting pummeled and people were in a near panic. I thought to myself, this is the perfect buying opportunity. I jotted down a list of five stocks and people were morbidly selling that I thought were being driven more by fear rather than by reasonable forecasting.
I remember having a conversation with Steve like that at Small Group during the downturn after 9-11. Steve recognized that a crappy stock market is a perfect time to buy.

But what to buy? I impulsively suggested investing in airlines. They were all under-performing after the air travel hit of 9/11, but there is no way they would all go under. We were right. The hard part is figuring out which airline stock to buy. The correct answer turned out to be Southwest, but unfortunately I was still a grad student with no money to invest in that sort of thing.

Right now the hit is in mortgage brokers and the trick is to find a smaller broker that isn't heavily involved in the sub-prime problems. They'll be in the best position to expand as other brokerages either go out of business or have to charge higher interest rates to cover their losses. The problem is finding that firm.

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