The Veridian Blog

Despite the fact that Congress passed the bailout plan on the 2^nd try, the feeling on Wall Street right now is that of blind trepidation as investors are hoping to no end that the bottom of this shakedown is within grasp.  The stock exchanges have fallen another ~5% this morning on widespread global recession fears.   Unemployment is over 6.0% and consumer confidence is falling to new lows. 

Is the recent sell-off warranted?  We think absolutely not.  Comparisons to the 1930's depression are scary but weakly correlated.  Sure, unemployment has risen, but it will take a catastrophic meltdown to reach the 20+% rate from the Great Depression.  Back then, deposits were not insured which caused massive runs on the banking system which in turn, caused banks to call in their debt, forcing people to foreclose and lose their homes.  These days, banks can't demand homeowners to payoff their mortgages (can you imagine that?).  Furthermore, today's stocks have a lot more backbone - P/E ratios are at very healthy levels and there are many decent buying opportunities. 

Unfortunately, many investors feed on the two dangerous emotions of fear and greed, especially when such comparisons are magnified by the media.  Massive sell-offs result because of "group think" and herd mentality.  The problems we have are severe and will take time to heal, but the fundamentals show that there is no sense in panicking right now.  For those of you with cash on the sidelines, the shrewd move now would be to buy.  In addition to the equity markets, there are also excellent opportunities now for buyers in real estate - be it residential, commerical or real estate funds.  Email us for details!