Finke: Be ready to act as opportunities arise

Intellectually we all know buying anything at its low point in a cycle is a great idea, whether it is clothes, appliances or stocks. Famous for getting fabulously wealthy buying British bonds just as Wellington defeated Napoleon at Waterloo, Baron Rothschild said the time to buy is when there is blood in the streets, even if it is your own (or something close to that).

But for purely emotional reasons, that goal is so hard to execute when it comes to stocks and other investments. Watching stock prices plummet now would make one think someone flipped a switch and hereafter, we will no longer be using grains for food, metals for manufacturing, and definitely not gasoline and other carbon fuels for transportation and energy.

Instead, current market prices show our complete trust in the promise of the U.S. government (think 300 million of your closest friends) to pay back trillions of IOUs over the next few decades. What drugs have we all been taking? I trust Apple Computer, Bed, Bath & Beyond, Conoco Phillips – at least one company for every letter in the alphabet – to help consumers and perform better than our government in the future.

Therefore my mind says it is nearly time to buy. In fact, the last time I felt this bad emotionally about stock market performance was in late February and early March of 2009. That period developed into the absolute low point of the bear market that began in late 2007. I have learned that when I, a diehard optimist at heart, feel like selling everything we have left and crawling into a hole, the end (of the collapse) is near.

Since then, the Nasdaq 100 has risen about 98 percent and the Dow and S&P 500 more than 62 through Monday’s close!

Patience is key however. It is entirely appropriate, necessary and safest to wait until the big clearance sales are over. One must have a strong stomach to buy a good stock at a low price, and then watch it fall another 10 or 20 percent before it recovers and moves on up again. The current downtrend could continue for a few more weeks or more.

It is far better for most of us to leave some potential profit on the table. Wait to see a low clearly established from which the Dow 30, the Nasdaq 100 and the S&P 500 all rise decisively on unusually high trading volume, then rise again on even higher volume about a week later.

You know intellectually you cannot trust your feelings for guidance. The storms will end, the sun will come out again and people will again make wonderful profits from rising investment values. Will you be one of them?