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Written by Steve | Published: |
When I was about college age I remember going grocery shopping and buying some of the downgraded or aging beef to save a few bucks.
I think we have all been there before trying to scrimp and save to get buy or save up for something more meaningful or even just pay the bills.
Luckily I never got physically sick from doing this but I remember cooking the beef extra long and adding a little extra salt to make sure it was safe and still tasted ok in order to calm my emotional worry that somehow that beef would wreak havoc on my body.
It’s funny what we do to try and compensate for our choices.
Right now I think the market is going through some major cognitive dissonance.
On one side we see a chart like this:
This is a chart that tracks the trades, holdings and options market. It labels this activity of bulls vs bears with a “greed” index.
There is an overused but famous quote from Warren Buffett that says:
“Be fearful when others are greedy and greedy when others are fearful”
As one of the most successful value investors of all time, essentially he is saying buy when the price makes sense for the value, not just because others are doing it.
So as the greed index is running up…
The US debt market just got downgraded in their rating this week.
The language around what is really happening to the financial infrastructure of the U.S. is very politically charged so you will see all sorts of ‘opinions’.
And personally I’m not saying this downgrade is the end of the U.S. economy just suggesting that when you see things running up you don’t just jump on the bandwagon.
Make sure that you are properly allocated between actuarial and speculative assets and understand the risk and value in each investment.
Right now it is critical to stay sharp.
You don’t want to end up with a parasite from downgraded beef.