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Russ Ramsey Says Stick to Your Investment Plan
Russ Ramsey says the stock market will steady, just as it did in the 1930s.
(Katherine Frey - Twp)
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Then, of course, he quoted Buffett. If you talk to Russ for more than a few minutes, a Buffett bromide will seep into the conversation.
"Warren Buffett has a great quote where he talks about racing at the Indianapolis 500. And in Indianapolis, they say that 'to finish first, you must first finish.' The point is, you have to have staying power. Anybody who buys a stock who isn't prepared to see it go down by at least 50 percent, hasn't studied market history. Just because a stock goes down by 50 percent doesn't mean the company has lost 50 percent of its value. That's how investors benefit from market hysteria."
Ramsey thinks the equity markets could bounce around for the next one to three years. After that, he said, company earnings streams could be at their lowest multiples in more than a decade.
He said that when stability returns to U.S. Treasurys, Libor, spreads and other financial instruments, many of which I do not totally understand, that's when we'll be past the worst part.
"Watch for normalcy returning," he said. "When you see stability, that will be a sign that the equity markets will function normally, and my guess is you will be able to buy a bunch of great businesses at the lowest levels we have seen in 15 years."
Thomas Heath's "Value Added" column focuses on Washington's entrepreneurial set and runs weekly on the WashBiz Blog at www. washingtonpost.com/washbizblog.
