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Glass half full? Glass half empty?

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Week in review 030109 to 030709

We are officially in Obama bear market (source: Bloomberg), in other words, the stock market (i.e., Dow industrial for most people) dropped 20% since President Obama took office in Jan 20. Yesterday S&P 500 briefly touched 666 (the number of devil), pretty scary, huh? I am sure this economy/financial crisis has been the hot topic in many kitchen table, or office cafeteria. The financial media is also taking the crisis as oppertunity — we have seen numerous experts, panel discussions, such as the “Help Wanted” talk last night on CNN money, which is mainly talking about the Feb. job (loss) number: 650,000. This number is actually small, if we put it into perspective that 20 million Chinese migrant workers already lost job since the end of last year (read my friend Bo Peng’s article if you are interested).

If one person listen to all these news without checking out the real world, e.g., visiting Wal-Mart (NYSE: WMT) or McDonald (NYSE: MCD), one may think we are near to the end of the world. But as famous investor/businessman Warren Buffett said in his 2008 annual shareholder letter: America had been in much worse condition, and had came back from all these situations before. May I add “dido to the world”. For me personally, 30 years ago I walked to attend village school in southeastern China, and now I work as a software engineer in the midwest US. Although my wife often joked we got stuck here (to some extent I agree), I think progress has been made.

What’s your risk tolerance level
Generally, the older a person gets, the less risk tolerance he/she likes to take. But age is not the only factor, I think personality also plays an important role, e.g., my wife does not like the potential loss of investing in stocks. She prefer CD or bonds (safe interest) much better.

Be greed when others are scared; vice versa
Back to this famous word said by the famous guy from Omaha. I think it’s very applicable these days. When the pension fund, mutual fund and hedging funds are selling because of redemption, or for the fear further loss (same thing can be said to many retirees and working adults), the deal becomes sweeter. This is a time for us to take a deep breath, do some homework, and start picking the potential winners…

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