This old bull stood on the hill and watched the herd mindlessly careen first in one direction and than another—spooked once again by some irrational fear. It was a sight to behold! And the dust they raised will probably take a good while to settle.

As things were going, it was beginning to take a little effort for intelligent investors to find worthy buying opportunities, what with the herd commencing to trust the recovery (without a clue why) and beginning to again overvalue some of the good companies.

But, thanks to their skittishness (and cluelessness), we’ve got another fire sale going on and part-ownership of those good companies is once again affordable for the educated, business owner-aspirant.

For rational investors, whether Greece hits the skids or the Dow tanks, the value of your portfolio is what it is—which is no different from what it was. And it is still not as valuable as it will likely be in the future, assuming you used the appropriate care in picking the companies to own whose operations generate solid earnings growth for their owners. What counts is not the herd’s perception of its value; it’s your recognition of its real value: its rational value.

If you use Investor’s Toolkit 6, the Rational Value can be found on each portfolio’s “Overview” page. If you don’t have the software, you can easily calculate it. For each company, simply multiply the trailing 12 months’ earnings per share by the company’s “signature PE” and that result by the number of shares. The sum of each holding’s rational value is the value of your portfolio, based on what investors will pay when they’ve come to their senses.

You’ll never lose any money—ever—if you can hold onto your shares until the market comes back to its senses, which it always will. Even if you can’t for some reason, if you take out only the minimum you must, it’s likely that the limited loss on those withdrawals will be more than compensated for by the return on what remains.

Ellis Investment Concepts

Watching and listening to the Congressional inquisitions this past week, I had to believe that the Academy Awards needs to add a new category called Best Congressional Performances. Of course it would be difficult to decide whether the performances should be considered under Comedy or the Drama categories.

The righteous indignation and wrath displayed by the key players was great theater, of course, and played well to those political populists who still don’t understand that it was this very same Congress that forced these institutions go into the sub-prime mortgage business against their wills in the first place! Read more…

Ellis Current Events, Food for Thought blame where it belongs, congress, executives, Goldman Sachs, responsibility for meltdown