Monday, October 13, 2008

Thanksgiving in Canada

Today is Thanksgiving Day in Canada, and the main thing I’m thankful for is that the stock markets in Canada are closed. Unfortunately, our American friends won’t be celebrating Thanksgiving for a few more weeks and their stock markets will be open today. So, we won’t get a complete break from the barrage of panicky reports about stock prices.

Maybe we would be better off if stock markets were only open one day per week. This might reduce panic and cause more investors to take a long-term view. In his 1993 letter to shareholders, Warren Buffett said “after we buy a stock ..., we would not be disturbed if markets closed for a year or two.”

I’m not as confident an investor as Buffett, but I understand the idea. I own my current set of investments because I believe they will do well in the long term. I’m not gambling on short-term moves.


  1. Well, big up day on the US markets. Saw a quote recently:

    "Volatility is a symptom that people have no idea of the
    underlying value" - Jeremy Grantham

    It's an interesting piece of computation that a 10% drop has to be followed by a 11.1111% gain in order to return to its pre-drop state. A 20% drop needs a 25% gain. Do you have a quick mental calculation for figuring out the gain required? An easy one is a 50% drop requires a 100% gain. Still, even though a 50% drop makes the math easy, I prefer smaller losses in my portfolio.

  2. Gene: In the case of Nortel, a 99.9% loss requires a 99900% gain to get back to even. If people have no idea of the underlying value, then I'm optimistic about my investments in Berkshire Hathaway. Buffett should come out of this having made some profitable moves.

  3. I'm a big fan and holder of Berkshire Hathaway too. I bought a little early (er... or way too late), starting in 1998, so I suffered a lot of lean performance years, but overall, it's been an all right investment. Also, with the Canadian dollar tanking over the last couple weeks, it's been a good stock for limiting my losses. The rest of my US picks though? UGLY.

  4. Hmmm... 99900% seems a little unlikely. Maybe the same chance as a flipped coin landing on its edge.

  5. Gene: I'm definitely not expecting much from Nortel. You should take my guesses with a grain of salt, but I predicted some time ago that Nortel would just continue to leak out employees in a never-ending cycle of reducing costs to match revenue projections, and then failing to make the revenue projections, and having a new round of layoffs. Nortel was so large that this cycle could easily continue for a decade before they either become stable or die entirely. So far my prediction looks good, but who really knows what the future will bring.