Financial Disasters Have Silver Linings

This is Thanksgiving week, and not a moment too soon for a day or two off. Given this fall's market gyrations, weekends when markets are closed have been among the few respites from the financial crisis, and even weekends are getting whittled away. I find I have to go online Sunday night to see what shock may be in store for Monday, as I did this past weekend to check on the fate of Citigroup (C). But surely even Henry Paulson is taking Thursday off.

As we gather this week to give thanks, investors can perhaps be forgiven for being in a less than ebullient mood. I've already been reading plenty of columns that indicate we Americans are too materialistic; that money isn't everything; that friends and family are far more important; that we should be counting our many blessings, etc. Citigroup has had an ad campaign to this effect running for some time, which may help distract shareholders from the 80% drop in the share price over the past year. No doubt all of us will indeed find many things for which to be grateful, and I doubt you need any guidance from me. But the fact remains that for most people, 2008 will not be a year that stands out for its financial blessings. I know many people who are distressed by their recent financial reversals, and pretending otherwise isn't going to make them any merrier.

I can't make the market recoup all its losses, but confining ourselves strictly to matters financial, are there at least some things we can be thankful for even if our net worth has taken a recent beating?

• It could've been worse. This is of course a truism, but if the second-hand reports of the dire warnings issued by Treasury and the Federal Reserve to the White House on Sept. 18 are correct — "We're literally maybe days away from a complete meltdown of our financial system," paraphrased Sen. Chris Dodd (D., Conn.) the morning after — we have indeed skirted a catastrophe. We can still write checks, withdraw funds from a money-market account and use our credit cards. Imagine our lives if those privileges were abruptly terminated, and you may feel a wave of gratitude that the financial system is still functioning.

• Also under the "It could've been worse" rubric: You could've been highly leveraged, like plenty of hedge funds now winding up operations. If you've followed the advice of this column, you've never been leveraged, and now you know why. Leverage may turbo-charge results on the way up, but it's crushing on the way down. Nor were you in illiquid investments like private-equity funds. Imagine getting another capital call just as your liquid assets are plunging in value, and having to sell into the collapse.

• Investment assets are on sale. Little more than a year ago, everything seemed expensive. Now everything seems cheap, so much so that it's hard to know what to buy first. Falling stock prices have gotten most of the attention, but prices of corporate investment-grade bonds, municipal bonds, REITs, commodities, junk bonds — you name it — have also plunged. You can even get good deals on certificates of deposit.

• Everything else is on sale, too. Speaking of inflation, you can stop worrying about it for the foreseeable future. No one wants deflation to get out of control, but a little certainly seems welcome. Clothing, even premium brands, seems to be at least 40% off. Practically every store window in Manhattan has an enticing offer of some sort. Car dealers are desperate; surely there's never been a better time to bargain for an automobile and fill it with cheap gas. (I saw $1.89 a gallon in Missouri last week.) Even foreign travel is cheaper and hotel rates have plunged. As best I can tell from the fall auction results, fine art prices have basically been cut in half. And if you're shopping for a home, make an offer. Sellers are reportedly grateful for bids they once would've considered insulting. So buy something on sale. You can boost the economy and be grateful for a bargain.

As the writer of Common Sense, I have something else to be thankful for. I was in the locker room this weekend when someone recognized me from the image that accompanies this column. He introduced himself and thanked me for the moral support he'd gleaned from my columns during the financial crisis as well as the long-term perspective I espouse. Given the immediate-gratification attitude of so many people, I was especially pleased, and I'm grateful to him and to all of you who read my work.

During the furious selloff of last week, the Nasdaq Composite fell well below my latest buying target, which was 1375. This marks the fifth consecutive 10% decline since I began buying in January, the worst such sustained decline since the bear market of 2000-2002. On Friday I did more buying, of index funds as well as adding to my positions in Google (GOOG) and Apple (AAPL). The next threshold is 1100, or 60% off last year's high. Much as I like a good buying opportunity, I'll be thankful if we never get there.