Buy when there is blood in the streets…

Posted by Sean | Posted under Investing, Quotes, Ramblings | September 25, 2008

I see young(er) people who think the stock market is a video game. Don’t worry if you crash your sports car at 200 MPH, or get shot up by all manner of firearms. Just hit the reset button and try to run up the score again. Yet I have to reflect on the true nature of the “blood in the street” quote.

1. “Be greedy when others are fearful.”

2. “Buy when there is blood in the streets.”

These quotes are used interchangeably, but I don’t think they are identical.

…continuing the “in the street” analogy, literally, you have people with money walking down a street. In the first quote, some people get spooked, rush to leave the street, and leave their money behind. Maybe it is getting dark, maybe they saw a sketchy stranger, whatever. In the second quote, there is blood. People do not bleed for no reason. Maybe the person in the first quote was not deterred by the sketchy stranger, and the stranger started stabbing them. In practical terms, I think it speaks to the difference in a financial crises and an economic crisis. Not every sale of stock is between a willing buyer and willing seller. I think that could account for some of what we are seeing these days.

“When there is blood in the street, avoid getting stabbed!“

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2 Comments so far

Uncommonadvice September 26, 2008 6:21 am

Taking the above analogy across to the property market, there is “blood on the streets” at the moment and people still aren’t buying.

Confidence is low, whilst the sale is on!
Sean September 26, 2008 8:36 am

Stocks, real estate, commodities… a lot of major markets are down big in the aggregate. Plenty of buying opportunities eventually, just don’t bring a knife to a gunfight.

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