When to Invest

There is famous story about a savvy investor in early 1929 who was getting his hair cut. Hearing his barber go on and on about how much money he (the barber) was making in the stock market and getting tips on what the barber thought were the best investments, the broker came back to his office and promptly sold out his entire portfolio. He missed the market peak by a few months but was all in government bonds when the market crashed in October. His theory was that when investment mania had gotten to the point where everyone who could conceivably be in the market was in the market, then there was nobody left to buy and prices had to come down.
The tragedy of this is that invariably the less sophisticated investors, the later investor, and the investors least able to bear the losses get in at the end and lose. We saw this in the housing panic that we are currently going through. Older and wealthier homeowners for the most part have owned their homes for a long time and are unhappy when the perceived value of their homes goes down 30%. But it is the young and less affluent who have scraped their down payment together that are really devastated when their homes go underwater and having started with little now have nothing.
There is something that investors can do about this but it will probably never catch on because it requires you not moving with the herd. Chinese stamps rose dramatically in price over the last twenty years for essentially three reasons-the increasing wealth and industrialization of China, greater education levels and nationalistic pride focusing attention on the products of Chinese culture, and a fear of traditional banks in an essentially totalitarian political environment means a desire to have hard assets that the government can’t freeze. But with the Great Recession Chinese stamps have finally come down in price, many as much as 40%. Chinese stamps, like homes that people live in, are well off their high prices, but people will always want to own their own homes and the factors that caused the great run-up in Chinese stamps hasn’t changed. Using the opportunity now of lower prices for Chinese stamps to add them to your collection may well prove to be the best philatelic investment that you have ever made.
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