be in the game

This past Thursday, Columbia Business School held a conference on value investing to commemorate the publication of the revised edition of Benjamin Graham's classic volume, "Security Analysis." Seth Klarman of Baupost Group in Boston is an editor of the book and one of the leading value investors in the country.

"Normally, as a buyer you have to compete with a lot of very, very smart competitors," said Mr. Klarman. "But many of the smartest people are on the sidelines now because of redemptions, margin calls or panicked-out-of-their-mind selling. So you don't have to be as smart as you did before. You just have to be in the game."

The day Mr. Klarman spoke, the Dow fell an additional 348 points, and 658 stocks, or more than 15% of the total, hit new 52-week lows on the New York Stock Exchange. Yet the word Mr. Klarman and several other speakers kept using was "excited."

That is because investments everywhere are priced as if the whole solar system were going out of business. U.S. stocks have lost 24% since Jan. 1; foreign stocks are off 32%; emerging markets, nearly 40%; junk bonds are down 13%; even municipal bonds have fallen almost 10%. Money is pouring into U.S. Treasury debt -- so much so that stocks now offer more income than bonds do. The dividend yield on the Dow Jones Industrial Average is currently at 3.14%, higher than the 2.68% yield on the five-year Treasury note.

With so many professional money managers afraid to act, with most of the public in the grip of fear and anger, you should put your cash and your courage to work.

[via chucks_angels]