Turmoil and financials

So far the turmoil is having larger effects in other countries, but we may have some effects. I will say I have been through many wacky things in my investing life: 1987 crash, Japan crash, Long Capital Management, Dot-Com, 9-11 and so on. I remember what John Templeton after the 1987 crash, his message was to be optimistic.( about 2:55 http://youtu.be/o_fxEoF8Vl8)

Short term, medium term things happen. But in the long run be optimistic. I am noticing all the political turmoil: China, Iran, Europe… But we will always have have some kind of political trouble in the world. Despite that turmoil, innovation happens and that gives investors opportunities.

One place that I think the turmoil will have an impact is financials. It had looked like the Fed was going to raise interest rates, I think that would have been helpful to financials, but I think the world turmoil will keep interest rates down longer. Helpful to borrowers in the U.S., but not to lenders.

So banks may have a longer wait for rising interest rates and a “normal” rate structure.

Watching the international turmoil, Flygal
Long BOFI and pondering impacts, see all my holdings on my profile


I will say I have been through many wacky things in my investing life: 1987 crash, Japan crash, Long Capital Management, Dot-Com, 9-11 and so on.

As a side topic here, but related to Saul’s overall investment style and thesis, when you mentioned Long-Term Capital Management, it reminded me of the Roger Lowenstein’s very interesting and eye-opening look into the rise and fall of LTCM, When Genius Failed:


Reading about the guys (virtually all men) who set up this fund, two of whom were Nobel prize winners in economics, makes you appreciate Saul’s approach even more. His reliance on company fundamentals, value, little/no debt, and actual numbers v. arcane mathematical formulas provides continuing evidence of a lot better management of long-term capital.



I think another book that is very important is: http://www.amazon.com/Misbehaving-Behavioral-Economics-Richa…

Academics often get things wrong because they expect people to behave rationally. Ask any psychologist, psychiatrist, or physician if people act rationally in their own self interest. At best the answer is sometimes. The markets get irrational, opportunistically we can use that irrationality as individual investors.

And of course there is uncertainty, involved as well. My husband sells computer equipment 20 years ago they used to say that “No One lost their job for buying IBM” meaning that if you tried something new and it did not work out, you are blamed, if you bought stalwarts and something went wrong no one blames you. So if you buy stock like Wells Fargo, SBUX, and Intel you will not lose your job if they lose money, but if you buy BOFI, ZOES and AMBA watch out.