In an effort to continually disambiguate fear and reality, I thought that it would be prudent to kick off my blog by mentioning why the markets were down, albeit not significantly, today (Aug 18, 2008). Evidently, the market was overcome by panic due to an article in Barron's titled "The Endgame Nears for Fannie and Freddie", obviously refering to FNM and FRE. The gist of the article was that the government will have to act on a "bail out" of sorts, where the shareholder value will be nil. Obviously, FRE and FNM closed -22.2% and -24.9%, respectively, for the day.
This panic led to sector wide hysteria and depression, and Mr. Market unloaded some very sensible long term investments. Obviously, days like this present great chances for buying wonderful businesses and attractive prices. The trick is to use the identify the whims of Mr. Market and use it to your advantage. This is easier said than done. My primary purpose for this blog is entirely selfish -- it is to use this place to write my thoughts and further perfect my investment methodology.
The methodology is quite simple (and heavily influenced by Ben Graham and Warren Buffett). I try to stay informed with the macro long term picture, try to tune out the daily noise of the market, and buy excellent businesses being offered for purchase at significant discounts to their intrinsic value.
