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To Boldly Go Where No Chicken Little Has Gone Before
September 30, 2008
Blog
27

A day after the Dow plummeted 777 points, the biggest single day fall ever, I felt it appropriate to blog about finances. However, my thoughts on the matter really haven’t changed since the LAST time I blogged about the volatile stock market. So, the following was originally published on January 7, 2008. The basic idea? We all need to simmer down now.

I find it both sad and funny that now that I’m debt free and in a position where I can begin saving money and investing it for the first time, a recession looms over the economy. The first three days of trading in 2008 were the lowest in the stock market’s history since 1929.

I’m no economist, but I’m pretty sure any reference to The Great Depression era is a bad one.

That said, I take comfort in the knowledge that things in the stock market (like everything else in life) are never as bad as they appear. The people who do this for a living or as a hobby are, by and large, Chicken Littles. When it’s sunny outside they are convinced it will be that way forever, but as soon as a single rain drop falls they begin screaming and running for cover in anticipation of an upcoming flood.

Which brings me to one of my favorite quotes about money:

Be fearful when others are greedy… be greedy only when others are fearful. – Warren Buffet

Of course, anyone who has seen The Mummy knows that that is isn’t always good advice to follow. The character “Beni “went back inside the ancient pyramid to grab more treasure even though he already had gathered enough to last several life times. Everyone else in the movie at that point was fearful (you’d be too if an evil mummy was trying to kill you), but Beni was greedy.

Sure enough, Brendan Fraser’s character defeats the mummy, someone accidentally trips the pyramid’s self destruct sequence, and Beni ends up getting trapped inside the pyramid and eaten by several thousand bugs of some sort.

That is why I like to slightly tweak Buffet’s advice:

Be fearful when others are greedy… be greedy only when others are fearful. Unless your life is in imminent danger and you’ve already got a lot of money, in which case get your butt out of there before the bugs get you. Fool.

Or more eloquently:

Be cautious when others are bold. Be bold when others are cautious.

Of course, the meaning of “bold” is in the cerebral cortex of the beholder. To one person, it could mean betting your life’s savings on the Super Bowl. To another, it could mean putting your money in the bank instead of under your mattress.

To me, it means doing exactly what I would be doing if the stock market was booming and the immediate outlook for the economy was great. I will make the same conservative investments every paycheck. I will spread my money around so that I don’t have all my eggs in one basket. I will continue to live below my means.

And in five years, when I’ve accumulated a nice nest egg, I’ll bet it all on the Atlanta Falcons winning the Super Bowl.

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