The Rule of Sanity

Posted: April 20, 2010 in Unsorted

It is a hysterical watching how our stock market has been performing for the past over a year and other money market players are going insane every day. Yes, everything has gone out of order and the masks for many ugly faces have been unveiled, but the world has not come to an end. While dinosaurs had no one to rescue them from extinction, the global financial system has world governments leaping to keep it alive and breeding.

So how did everything get out of order? I have lately come to the conclusion that there must be a benchmark to doing everything, a benchmark which I call the “Rule of Sanity”, a benchmark where the standards are levelheaded. For example, you go to work and you get paid. You work harder and smarter and you should get paid more. You would not expect to go to work late every day, spend your hours gazing out of the windows doing nothing and still get a promotion.

But investors, who are no longer investing in stocks, but indeed traded their stocks in the stock market and expected their money to double within three months without making any effort. They would expect to beat the market by taking profit and avoiding losses by exiting at just the right time, while giant world renowned companies like CITIC Pacific and Lehman Brothers had a hard enough time knowing what’s going on in their organizations. Depositors expect a much higher return on TDRs and deposits from their banks with a gig of higher yield. Investors today have bought into extreme greed and have abandoned the rule of sanity – and the people (our so-called brokers and port-folio managers) who were preying on these investors have gone even more insane over the years.

Well, it is time to go back to basics and give your battered portfolio a gentle massage. Good companies are still expected to trade at unbelievable discounts and our portfolio managers are there to spot them. It is also time to take your advisor for hairy crabs (to help boost the economy if you will), and see how you can benefit from the current market with the sort of good quality investments that Warren Buffett wouldn’t mind holding for a lifetime. Revise your investment pattern to a more disciplined and committed one, one with strategy, and one that goes by the rule of sanity.

It is high time we approach positively while looking at the current financial crisis, because life goes on. Unless you are a professional investor or a fund manager whose mandate is to make money responsibly for your clients all day long, then find yourself a trustworthy advisor, stick with a mutually agreeable strategy, and let him do the work for you.

The next time you see something that is too good to be true… it probably is!
Never give up living a life you love, even under these extreme circumstances.

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