This one too shall pass..

The sheer scale of the 2008 market plunge has outperformed all expectation. How much lower can things go ? When are we going to get to the bottom and over with the current crisis ? Re-wind back to the summer of 2007. All we heard of then was the US subprime mortgage crisis. Later in 2007 - early 2008 the credit crunch became the buzzword. Now we have a full-blown global financial crisis leaving major casualties of Lehman Bros, Wachovia, Bear Stearns and numerous others in its wake.
As of today the US and Britain both have now committed close to $2 trillion of public funds to rescue their banking sectors. In a historical context, we are probably seeing the most serious, co-ordinated financial commitments made in reaction to peacetime events by both Washington and London since the second world war.
Despite these laudable interventions by governments and Central Banks' rate cuts some I can see further inevitable bank failures in the coming months across both sides of the Atlantic. Without much randomness, many more billions shall be lost.

Fast forward to 2009.
- BRIC economic crisis as the OECD and G8 economies slows.
- More notably, China's overheating economy slows down. Oil price dips concretely below $75
....Then follows the definitive crash in oil and commodity stocks...
- Further Russian stocks slide and possible political instability in Russia due to huge resource revenue losses.

Which industry will break down and be nationalised next in the US ? We will know in 5 weeks the person (Obama or McCain ?) to handle the ensuing political fallout of the mess and its global ramifications ?
Overall, the overbearing feeling of bearishness still persists.

So what should a value investor do ? My advice :
1. Take time out of the equation. This simply means taking the long-term view.
2. Hold on to quality. Look for those companies that have existed for over a 100years and outlived the major crisis (the Great Depression, WWII and the post-war recessions of the past 50yrs). In fact they have consistently paid dividends over these periods. Because they are run by smart and honest managers who recognise the need to manage risk, they remain competitive, keep debt levels low and maintain loads of cash on their balance sheets. In fact they are looking at making acquisitions right now and are still able to pay dividends. They continue to attract many generations of shareholders.
3. Re-invest your dividends (even if it's been cut in half). This is the secret of long-term compounding of investment value.
4. Do not log on to view your portfolio everyday.
5. Be calm and bold about any losses. Write down the assets that need to be WRITTEN DOWN. Tell your brain that they are written down for now, but not WRITTEN-OFF.

Be at peace and Sleep well at night. This one too shall pass...