October 22, 2009

As I write this, the Dow Jones Industrials are over 10,000. Last June when the market was still down at about 8,000 I wrote a column that said "...it's the perfect time to take risks..." I was not referring to taking a risk in the market, but rather in your business. (I guess it would have been a good time to invest in the market, too.)

The point of that column was that risks are good business when the economy is in trouble. When nobody is taking risks, the brave take a few. When the economy is in bad shape, sales are off, and everyone else is in the trenches, it's a good time to stick your head up. No one is going to shoot it off because most people have taken a "duck and cover" stance. It's tough for them to shoot your head off when they are not looking over the top of the trenches. A good offense is a great defense right now.

Baron Rothschild was a British nobleman in the 1700s and was a member of the Rothschild banking family; he has a very famous quote: "The time to buy is when there's blood in the streets." Rothschild made a fortune using that theory when he bought during the panic that followed the Battle of Waterloo against Napoleon. Actually, the full quote is said to be: "Buy when there's blood in the streets, even if the blood is your own." We certainly all have a lot of our own blood in the streets!

The contemporary investing guru, Warren Buffet, said the same thing a bit differently: "You pay a very high price in the stock market for a cheery consensus." So, if everyone nods their head at your investments, then the investments are probably not very good ... maybe just safe. When you talk does everyone just nod their heads or do they challenge you?

Aren't you tired of being safe? Take just one risk this week. In today's environment "risks" can be defined as doing the things you know are successful, but everyone else is afraid to do as they hoard their cash.