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Rate Cuts, Cash Infusion for Banks Needed Now


Worldwide efforts will help rebuild confidence.

It sometimes seems like nothing -- no action by Congress, the Fed, or the Treasury -- will cure the stock market's vertigo. In order to correct excesses, it looks like the market is going to have to go down.

This is something far more frightening than anything I've seen: So many of us have lost not only our sense of balance, but our hopes. And we are reeling.

This sell-off has become unbelievably vicious, and rating downgrades have begun to pour in for stocks already down 50% or more. The belated nature of the industry's reaction can only strike fear in the heart of the ordinary investor.

Last night, I pulled out my copy of The Intelligent Investor, by Benjamin Graham; while I may have been temped to toss it in the fireplace, I cracked it open instead. It had been a while since I'd revisited the wisdom of the man who provided the blueprint for Warren Buffett:

"The investor with a portfolio of sound stocks should expect their prices to fluctuate and should neither be concerned by sizable declines nor become excited by sizable advances. He should always remember that the market quotations are there for his convenience either to be taken advantage of or to be ignored. He should never buy a stock because it had gone up or sell because it has gone down…he would not be far wrong if this motto read more simply: "Never buy a stock immediately after a substantial drop."

This is, of course, easier said than done - especially when you're taking the kinds of hits investors are currently taking.

Let's face it: If people bought into the Ben Graham philosophy, daily average volume in equities would be sliced in half. There's a certain temperance that we need, and that's been missing for a long time. In fact, one could call it a lost art. Being calm enough to hold is already a lot to ask; being calm enough to nibble is an impossible request. At some point stocks are oversold - and that happens before the market turns.

Everyone has to be vigilant for opportunities; everyone has to be prepared, at some point, to take small long positions. This is doubly important for folks who don't buy puts or go short.
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No positions in stocks mentioned.
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