Not long ago, I was part of a small team that managed $ 20 billion for a Manhattan investment firm. Then, I had an accident and hurt my back so badly I was hospitalised - initially to manage the pain, and later for surgery. I was on morphine to dull the pain, and when I woke in the mornings I would see two of everything. The surgeon said I could never walk without a limp again. My firm gave me time to come back, but they could wait only so long. I had to let go of my job in late 2007. My back still hurts. What's kept me going is what I did in June 2007. I cashed out most of my investments from the US market.
Fear and greed drive stock markets around the world. Two of my dear friends are in hospital, being treated for mental depression. For the first time since I came to the US in 1987, I panicked in mid-September this year. That’s when some big money market funds ‘broke the buck’ — market lingo when a fund’s value falls below $1 per share. Nobody can say precisely when the market will touch rock bottom, but the signs are always there. As I write this, my guess is that we’re not too far away. What you’re seeing these days in the market is a tsunami of redemptions at mutual funds and hedge funds. So, most major non-financial companies in the US are trading not on fundamentals but on human emotion. Giants like Intel, Google, GE and Apple are all taking the hit.
Yet, this is as good a time to invest as any in the past 20 years. Personally, I’ve always done well when the markets have crashed. I buy when the world panics. This doesn’t mean I’m immune to the aftershocks of an economy in free fall but if you are willing to take advantage of wild swings in human emotion, you could make a pretty penny. Financial authorities around the world are pumping money into the system on an unprecedented scale. Given some time, this will work its magic.
On October 9, as I was watching the markets fall, my six year old daughter came back from school and saw me worried. She hurriedly emptied her piggy bank and gave me all the loose change she had. A satchel full of nickels, dimes and a few quarters. It was around half past 3, with half hour for the markets to close. The Dow was down 300 points. I started buying again that afternoon.