Crisis? What Crisis?

It has been more than 1 month since the Sub-prime crisis broke out. Back then, most if not all of the global markets faced a heavy sell down and many investors rushed for the exits and have been staying on the sidelines. Many things had happened since then: global mutual funds faced liquidation problems, some even stop quoting their redemption prices; banks have to disclose how much they are affected, to calm the nerves of investors and depositors, and of course, further panics and sell downs; the phrase "subprime crisis" has been on the front pages of newspapers almost everyday and many were screaming that the global stock market bubble is going to burst and the world economy is heading into recessions, multi years' recessions; the governments have to take various measures to calm the panics, including bailing out failing banks, pumping liquidity into the market; and most significantly, cutting its discount rates.. all in all, most were preparing for the doomsday and were all gloomy about the stock market back then.. just 1 month ago.. (However, not all things are bad, to fans of Arsenal Football Club, "We are back on top of the Premier League, yes!!")

One month later, today's front page stories? "Asian Stocks, rise to record"; "Hang Seng seeks 7th straight record high"; "Australian shares at fresh record highs"; "Singapore Straits Times Index hits record high"; "Indian Stock market hits record level"; "Dow Jones near all time high" and etc and etc.. I didn't made these up, try Google those indices and all these headlines will pop up in the search results page.. (hmm.. what about KLCI? "Malaysian shares slightly higher on Wall St gain.." er... nothing mentioned about "record highs" like the others.. oh well, at least we are not the only down market")

See how fast the mood swings? Call it funny or ironic, facts are, there are many that are hurt from such wild fluctuations, or at least, miss out on the run up that started few weeks ago. So, where is the market heading? Come to think about it, does it actually matters anymore? There are a few quotes from Mr Buffett himself that I would like to share (well, for my own records too),

"The market is there only as a reference point to see if anybody is offering to do anything foolish. When we invest in stocks, we invest in businesses."

"Charlie (his partner in Berkshire Hathaway) and I never have an opinion on the market because it wouldn't be any good and it might interfere with the opinions we have that are good."

"If we find a company we like, the level of the market will not really impact our decisions. We will decide company by company. We spend essentially no time thinking about macroeconomic factors. In other words, if somebody handed us a prediction by the most revered intellectual on the subject, with figures for unemployment or interest rates, or whatever it might be for the next two years, we would not pay any attention to it. We simply try to focus on businesses that we think we understand and where we like the price and management. If we see anything that relates to what's going to happen in Congress, we don't even read it. We just don't think it's helpful to have a view on these matters."

"For some reasons, people take their cues from price action rather that from values. What doesn't work is when you start doing things that you don't understand or because they worked last week for somebody else. The dumbest reason in the world to buy a stock is because it's going up."

"The future is never clear; you pay a very high price in the stock market for a cheery consensus. Uncertainty actually is the friend of the buyer of long-term values."

He didn't say these yesterday, nor one month back. These are all quoted at least a decade ago. Moral of the story? Do not try to predict the market, nobody will be successful doing that (unless one think that he/she could be smarter than the 2nd richest man on earth). Do your homework and stick to value investing and do what you understand. Believe it or not, that's what the most successful/wealthiest investor of all time has been doing since decades ago.