Fear of fear is generating fear

Open question to investors: What’re you doing liquidating U.S. stocks and going to cash?

Open rebuttal to such thinking: You invest because you want to first, preserve capital, but second and more powerful, you want to make money.  Where else besides the U.S. financial markets are you going to get access to innovative companies generating excess returns; a generally solid and honest financial reporting mechanism that conveys real information (hello China, hello India); a solidifying economy where business and consumer confidence is growing (hello Europe); a strong and growing stronger currency (hello Europe); a (sometimes too strong) harmonious accord between government, business and the populace that allows for rapid capital appreciation; and large, liquid financial markets (hello real estate)?

Is Europe experiencing a crisis?  Yes.  But the crisis has moved past a crisis of inaction to a crisis of action.  This is a massive shift.  Not only that, but the Germans, who are taking the lead role in resolving the crisis, are openly saying that they will not let the EU fail.  This is also a massive shift in thinking on their part.  Germany has transitioned from believing the Greek financial problems are a localized problem, to a global one that directly affects them.  Therefore, it is highly unlikely that the EU crisis is going to be allowed to get worse.  That means it is highly likely that what happens in Europe is likely to stay in Europe.  Effectively, the EU is going into financial quarantine mode.

So if you have taken care of all of the causes of fear and panic, you shouldn’t have effects of fear and panic.  Unless of course the cause of the fear effect is simply fear itself.  It’s my feeling that is exactly what is going on.  One of my favorite investment quotes is from John D. Rockefeller.  When asked about the source of his fortune he replied, “Always invest when there is blood in the streets.”  Is there blood in the streets?  There is a little bit.  I invested for the first time since November two weeks ago.  I have lost money in the short run.  But in the long-run (5+ years) I am certain that this will have been a good time to buy interests in U.S. businesses.

Jason