Keeping Perspective Following Thursday's Big Fall

"Dread of disaster makes everybody act in the very way that increases the disaster. Psychologically the situation is analogous to that of people trampled to death when there is a panic in a theatre caused by a cry of 'Fire!'" -- Bertrand Russell

One the greatest assets I have acquired during my years on Wall Street is perspective. We all say that we understand the concept of risk; that equities provide better returns than other assets on average, over time precisely because they contain higher risk, and yet on days like today, we tend to wring our hands and wonder what in the world is wrong with the world. Welcome to Riskville, baby.

I have worked hard nearly every day this year searching for those good companies trading at what I thought were attractive valuations. As of today, my fund is roughly flat for the year. In other words, I have made no money for myself despite nearly 7 months of work.

So how do I feel about this? Well, I must admit that I dislike losing money about as much as anyone I know. And yet, I think I can put today's trading action in perspective.

During my career I have seen many crashes, breaks and panics. In every single case, the market eventually recovered and went on to new highs. I suspect that this will happen again.

The talking heads will be debating for days the implications of today's market development. They will talk (in breathless tones, no doubt) about the causes and reasons for the big move down and will roll out the "experts" who, by the way, were telling us to be cautious about the markets. You don't remember those guys? Funny thing, eh?

What am I going to do? Some of the stocks that I liked but felt were a bit expensive look a lot more attractive to me today. I will likely shift some of my funds into some of these names. I am unlikely to make any actions that would be considered reactive to today's movements. I do not feel compelled to make my portofolio more or less defensive. I do not think that the fundamentals for companies like Kraft or Amgen have measurably changed in the last 24 hours.

So, my bottom line for today remains the same as nearly everyday --find good stocks trading below fair value, buy them and sell them when they become more fully valued. Boring I know, but that's how I roll...