Saturday, August 11, 2007 9:29 AM
You can always tell when world stock markets are getting volatile; just walk through any office and you will hear everyone abuzz about their retirement investments. Judging from this morning's Wall Street Journal, with the weekend afoot, everyone is taking a collective breath and reassessing just where they stand.
With this in mind, I thought it might be a good time to check in with the blawgosphere on the topic of financial markets. As might be expected, most of the writing relates to legal issues within the context of the perceived subprime lending, credit and liquidity problems assailing global stock exchanges.
Here is a sampling...
Stock Market Volatility, Subprime Loans, Credit Crunch Fears, and Our Global Economy - Banking Law Prof Blog
Will Subprime Become the Next Source for White Collar Crime? - White Collar Crime Prof Blog
Legal Tender: Liquidity Dump - The BLT: The Blog of Legal Times
SEC Efforts Against Ponzi Schemes - Securities Law Prof Blog
What the Credit Crash Means - Po as in Ponzi - Franchise and Biz Op Due Diligence
For myself, in times of uncertainty, I tend to re-read my favorite authors on the subject of investing, including Warren Buffett. Reading the thoughts of someone who has been investing for 50+ years through all manner of bear and bull markets, can provide a calming voice and help eliminate rash decisionmaking. In Berkshire Hathaway's 2004 Chairman's Letter, he said this:
Over the 35 years, American business has delivered terrific results. It should therefore have been easy for investors to earn juicy returns: All they had to do was piggyback Corporate America in a diversified, low-expense way. An index fund that they never touched would have done the job. Instead many investors have had experiences ranging from mediocre to disastrous.
There have been three primary causes: first, high costs, usually because investors traded excessively or spent far too much on investment management; second, portfolio decisions based on tips and fads rather than on thoughtful, quantified evaluation of businesses; and third, a start-and-stop approach to the market marked by untimely entries (after an advance has been long underway) and exits (after periods of stagnation or decline). Investors should remember that excitement and expenses are their enemies. And if they insist on trying to time their participation in equities, they should try to be fearful when others are greedy and greedy only when others are fearful.
Good stuff.