FREE KIC - NO. 37 NOV 08
Unbelievable as it may sound 'Free KIC' is now three years old and to mark the occasion I thought that it might be interesting to look back over some of the big picture ideas I have written about during that time.
In Opinion Piece 6 of March '06, "Brilliant Buffett", I wrote the following:
When I wrote this paragraph I failed to see just how big an issue this would become. I did not recognise the sheer scale of this particular time bomb. There I was warning readers about the problems of derivatives while at the same time I totally under estimated the problem. As the following extract from Opinion Piece 4 of January '06 indicates:
I honestly thought that the world economy was unlikely to be facing a major crisis. I was excited by developments in Asia. I thought that Asia would be strong enough to drive the global economy and as an example of this I wrote about the great things I saw going on in Singapore in Opinion Piece 14 of November 06:
In other words I have to accept that I failed to predict that the stock market was about to face such an awful time and I failed to predict that we would be talking about a depression as if it could be a serious possibility. Having acknowledged my lack of foresight in regards to the US property and derivatives bubble I should point out that in a way I wrote about the fact that I was unlikely to recognise in advance what would create the next crisis. In fact I wrote that I knew a crisis would occur at some future date and I knew that I had to be prepared to live with it.
I believe that Opinion Piece 11 of August 06 is particularly interesting because in it I wrote about crisis situations and the implications for my investment philosophy.
I want to highlight some of the things I wrote in that August 06 piece because I said back then that I was going to invest my own money in the stock market and I was going to avoid the same mistake that I saw other people making during crisis situations.
In other words I said that the stock market would fall in the future and that fall would happen for any one of a number of reasons and the fall would cause people to panic
I said that I would resist this temptation to panic and I would hold my nerve.
Here I am with my portfolio down over 38% for the year to date (as of Nov.14th). The world is in a recession and there is a genuine sense of panic. I am facing the very same feelings that caused other people I know to pile out of the stock market but it is my intention to hold my nerve.
I had hoped that I would not face such a major test of my philosophy so close to the time I started KIC but life throws these things at us and when we come out the other side of this I will at least be able to say that I did what I said I was going to do.
Only in 7 to 17 years time will I be able to answer the question I raised back then
Given how fast the last three years have gone it won't be as long as you think before I will be able to answer this question.......................Opinion Piece 240 in 2025?
If I am right that now is not the time to panic well the other logical conclusion is that now must be a good time to invest in shares. The equity risk premium must have expanded from three years ago and the anticipated returns for the future must be even higher. I should be buying but in the current climate I might have the opportunity to buy even cheaper so as always timing is really difficult.