WEALTH People are getting angrier. On Saturday, a passenger was kicked off an aircraft going to Denver for spitting in the face of a stewardess when she didn’t want to serve him another drink.
On Sunday, I was eating brunch with friends at a five-star restaurant. Three models walked in and demanded the table I was sitting at, saying they had been waiting for it but I had taken it when they stepped out. They called the hostess, the owner, and men in suits came down. It was an incident. One of the women was screaming loud enough so that all the restaurant customers turned to look. The external beauty of these women was boundless but something ugly was happening inside.
I get angry. When things don’t go my way, I feel like I want to control them or at least understand why it’s not going my way. But understanding sometimes eludes the angry. Sometimes there’s simply no rational reason why the world does the things to you that it does. And when that happens to me, I get scared. And when that fear happens, sometimes the world turns upside down, and by the time the fear subsides it can take a long time to right things again.
It’s easy to get angry at the markets. And the consequences of doing so can be just as painful. At present, the markets are down horribly on the year. I say “horribly” because the year has just started. It’s really not fair that in one of the best months traditionally (January), in one of the best years traditionally (an election year), the markets are already down 4-8 per cent depending on what index you look at. It’s hard to understand.
Like the other day, the markets were down 100 or so points because there were rumours Countrywide was going bankrupt. Well the rumours weren’t true. In fact, Bank of America is going to buy Countrywide. So did the markets go back up? Heck no. The Dow fell another 250 points. And if you get angry at these seemingly irrational markets, you might get afraid. I’ve seen headlines that try to spark this fear: fear of a global depression, fear that the US economy is teetering on collapse, fear that $300 trillion in derivatives are all worthless and the entire global fiat currency system has been a scam since caveman days and it’s all about to come tumbling down. I get that fear, having experienced it in the days after 9/11 or in the global internet depression of 2002.
Know that even if your instincts are correct (for example, it’s time to get cautious about your investing, which is never a bad instinct), it’s also the case that 90 per cent of your fear and anger is probably irrational. For everyone who pulled his or her money out of the markets in October 2002, most certainly regret it now. And a lot of people were pulling their money out then. Those middle months of 2002 were the worst outflows from mutual funds in history. The key is to take deep breaths, and thank God that at least nobody is dead. Then it’s not that hard to find stocks that will live to see the light of new market highs.
We know, for instance, that Wyeth and Merck are benefiting from the increased need for vaccines worldwide. Merck’s big winner is Gardasil, which protects women against cervical cancer, a worldwide plague. And Wyeth sells $2bn worth of vaccines a year to protect against pneumonia; a number which analysts estimate will go to $10bn by 2010.
Let’s look at another industry that will continue to rise: railroads. Warren Buffett just bought another few million shares of Burlington Northern. Why is he doing this? Well, with rising commodity costs, rising oil costs and rising global demand for every commodity out there, it’s no wonder that the best investors – Buffett, Carl Icahn, Atticus Capital and even Bill Gates (who owns a chunk of Canadian Northern Railroad) – are looking to buy railroad stocks. And Buffett just bought Marmon Company, a maker (among other things) of railroad cars and an owner of a Chinese container leasing company – further underlining the investment premise.
How can we play this? How about American Railcar Industries, where Icahn owns 11m shares and other value investors such as Cannell Capital and Keeley Capital own significant pieces. The company trades for just a little over five times next year’s cash flows and has a $300m cash pile.
Anger in general is an ugly emotion. It’s not even an emotion, really, but a distortion of fear and anxiety that often plagues us. And when it wakes from its nightmares, it often leaves a trail of despair in our lives. But to say hello to it when it wakes, and try to soothe it with common sense and reality, can often lead to discovering new opportunities.
