From the top guys at the United States Federal Reserve to the courier man at Federal Express - here's something everyone can relate to - the smell of money. Well it's not so much a smell as a looking sensation, according to new research out from the Kellogg School of Management. Their findings indicate people salivate seven times more than usual when viewing pictures of money.
This drooling over digitally presented cash is a conditioned response to desirable items. I get it when I look at high share prices.
Looking is as close as we get to high shares prices at the moment.
Meantime, whilst we have to put up with actual share prices, it pays to take sentiment out of the equity equation yet again and examine what we are dealing with. Robust and defensive businesses? Check. Historically and ludicrously low Price to Earnings Ratios? Check. Trading at massive discounts to intrinsic value? Check. At the end of last week there were some fantastic companies that could be snapped up for their cash book value alone. Now this, as investment advisers are fond of saying, is a real opportunity. And if this market gets much cheaper it runs a real danger of making itself look silly later on. I love a silly market, for when others act irrationally, you can profit.
After a week of complete trouncing, there are some real gems lying around waiting to be picked over for their deep value. Sharemarket sentiment is awful right now - which means unless we descend one stage further into outright panic, it's time to buy. If you choose high calibre and sustainable businesses, words like "plunge" and "sell-off" should signal a view to accumulate, not sell. It can be a little disheartening to see such a high daily fluctuation in your holdings. I know the feeling. But investors in the markets now are more hardy, they know that they are playing the long game. They've grown more psychological steel over the past three years. I've noticed a shift. Pragmatism is replacing the old habit of throwing one's hands in the air and pretending it's not happening. Try it.
