Have investors gone too pessimistic and oversold stocks?

Posted By on August 11, 2011

markets1108111217I listened and nodded in agreement to a little optimism this morning in a CNBC interview which paints a slightly different picture as it pertains to the financial health of consumers, US bank and companies. So far today (Dow about 11000 over the lunch hour) this might be making some sense to those who may have oversold U.S. stocks due to panic and fear?

Jim Paulsen of Wells Capital suggest that there is a “mania of pessimism.” Who knows what the market close will bring?

James Paulsen Mania of Pessimism (1 min 30 sec)– August 11, 2011

Comments

  • I’m not very encouraged with the market, but I’m still buying in all the way to the bottom.  Hopefully my money will actually be worth something (fiat) when the market returns out of this dip.

    • Having been through ups and downs before, one would think I’d be better prepared in handling the “distress” of a sell off. Unfortunately I’m no more prepared now (except that I know it happens) than I was back in 1987. At that time I was expanding my business and aggressively piling away profits and preparing for a tradeshow in the fall. In order to accelerate growth, I leveraged the savings as much as I could in the stock market in order to reduce the amount I would need to finance for a new press as interest rates were pretty high by today’s standards. Of course Black Monday changed that – http://is.gd/entiXk (although I did eventually buy a new press).

      About the only advice I can give to someone who is trying to save for the future — be it a downpayment for a house, to start a business, college for kids or retirement — is to develop a balance and consistent plan that you can live with if something bad happens. Be a little more aggressive in your early years and far more conservative as you near retirement. In my opinion you do need to plan and save … you can’t gamble for that one scenario (ie. leverage all in stocks for that press mentioned above). The only sensible thing is to diversify between a variety of investments — equities for grow (spread around sectors), fix assets for capital protection and enough cash and hopefully interest and dividends to pay bills. The one thing to avoid where possible is the taking on of too much debt; only the most disciplined can do this (unfortunately that would not be me – I wish I could claim otherwise).

      Thanks for the comment Jacob … and I’m with you buying a few oversold shares of companies with strong balance sheets. Some companies are cash rich, relatively lean and well positioned to grow when political and economic conditions show signs that we have had enough of the deficit spending, over regulating and “plans” to pay for by taxing the job creators, investors and corporations more (who can blame them for parking their assets … and much of it offshore … risk/reward ratio is not in their favor in the US anymore?)

Desultory - des-uhl-tawr-ee, -tohr-ee

  1. lacking in consistency, constancy, or visible order, disconnected; fitful: desultory conversation.
  2. digressing from or unconnected with the main subject; random: a desultory remark.