What to do when the Whole World Gets Drunk and Acts Crazy!?
The first thing that comes to mind in this situation is to do the opposite of everyone else. In 2009, the world markets ALL went crazy simultaneously and crashed to their fiery bottom in March. Did you catch that opportunity? Did you miss it?
If you nailed it, I bet it was a harrowing experience filled with self-doubt and worry. Welcome to the life of contrarian investors! Perhaps that’s why over here, we like to mix a beer or two with our finances.
Fortunately, this type of world-wide mispricing doesn’t happen very often.
What is much more common is mispricing in a single asset or a class of assets. Right now, I think silver, gold and NNVC are all seriously mispriced.
NNVC got that way because of a rather vicious article over on Seeking Alpha that says NNVC is set to plunge 80%. After the immediate price-drop, the lawyers smelled blood and started circling as of yesterday, which led to a further price cut.
NNVC is now priced at 3.11 and that’s a complete STEAL if the company and the product are the real McCoy. If the Seeking Alpha article is correct however, this thing is headed for zero. This kind of event is where fortunes are made overnight. Either NNVC is good and anyone who buys here will see the price double within a few months or NNVC is garbage and will go to 0 in a couple of months. Either way, someone will get rich.
Mr Beerver thinks NNVC is good and will poney up a bit more to bolster his holdings:
He’ll sell 1360 shares of ISCO at 0.22 and will buy 96 shares of NNVC at 3.11.
There is one problem with this approach though. This is also called catching a falling knife and is generally considered as something foolish to do. You never know just how far down a stock will go before rebounding. It may in fact never rebound and simply go straight to zero. Do you have the fortitude to handle that?
Mr Beerver apparently thinks he does. His fortitude is born of research. He knows the companies he owns. He spends time reading about them and figuring out their ins and outs. Unfortunately, owning individual stocks isn’t something to just do and forget. The reality of these companies changes everyday.
Just last year, Nintendo was at the top of the world and this year, they’re eating crow. Things change. Sometimes very fast. Being informed is the ONLY edge little investors like Mr Beerver have.
So, if you choose to own stocks, don’t drink your beer while watching football. Drink it while reading up on the companies you own. Oh yeah… I guess I should say that drunk investing ain’t smart. Oh well…