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"Suppose," he cried with feeble violence, "that all the debts in the world were called up simultaneously, and immediate payment insisted upon, --what under our present conditions would happen then?" -The Lost World (1912)
You see it in the headlines everyday. Greece is going to bankrupt Europe. China is manipulating currency. The American debt has surpassed $16 trillion. France owes Germany 120 billion Euros. Germany owes France $200 billion. And on and on it goes.
Fear is present in today's market climate. It may surprise you, though, that the current fears have been around in various shapes in forms for years. I was shocked to come across the above quote in Sir Conan Arthur Doyle's The Lost World. It sounded like an article I would read in the USA Today, yet this quote is over 100 years old.
Panic is fun to propagate. But how real is the present day threat?
These are undoubtedly turbulent times. In the United States, we are facing a heinous economic crisis. $16 trillion is a lot more to worry about than when it hit $5.5 trillion in 2000. On a surface level, one might be inclined to think "well, that's only $10.5..." To think such a thing is to be ignorant of the astronomical mathematical term that is the word "trillion." We are deep in this mess now. Everyday, economists must reach new imaginative heights to brainstorm a possible solution.
Europe is also real. They have an enormous debt problem as well. But unlike the USA, they don't have to battle the issue across party lines. They have to debate back and forth across sovereign country lines.
I don't mean to make light of the mess. It's real. The threats of a major country default and world-wide recession are more real than when The Lost World was written 100 years ago.
But, is recession the death of investing? Is it reason to give up completely forever? The answer should be no. In any economic climate, there are winning and losing investments.
You don't have to look very far to find companies that shone through our US recession. Established companies like McDonald's (NYSE: MCD) and Apple (NASDAQ: AAPL) were able to continue to execute their business plans. Imax (NYSE: IMAX) was able to continue to re-brand itself from documentary theater to a premium movie experience. Relative newcomers Netflix (NASDAQ: NFLX) and Chipotle Mexican Grill (NYSE: CMG) were able to get into a groove of growing and developing their businesses. Now a couple years on this side of the recession, we see that any of these five investments before the recession was an absolute home run.
My Real Fear
My real fear in investing is not the economic climate we currently find ourselves in. My real fear is letting popular opinion cloud my investing mind and cause me to miss out on winners like these. Fear and sentiment is no way to manage your portfolio. It takes a discipline that can rise above the moment and get a clear picture of what is really going on.
Despite what is going on in Washington and Berlin, I am convinced that tomorrow's winners are out there right now. It's up to us to be steady in our investment approach. Even when economies are shrinking, people still need and want the goods and services many companies provide.
When you calmly assess the situation, you see that McDonald's is still poised for future growth. They could double their Chinese restaurant count, and still have fewer McDonald's than Yum!'s KFC in that country. Chipotle heard a rumor that they were supposed to be slowing down, but try telling that to them. Next year could be a record year for restaurant openings, and their new concept ShopHouse has a lot of promise.
To be sure, there are losers out there as well. One wouldn't have to work hard to create a chart showing five big losers over the past ten years. But those losers didn't happen just because of the recession. There are always losers.
My suggestion: turn off the news and review your investment strategy based on what has and what hasn't worked for you in the past. Once you've done that, look for companies trading at a fair value that line up with your investing strategy. Once you've made your decision, stick with it. Don't be blown by every wind of panic that exists. With discipline you can ride through any economic storm.
thequast has no positions in the stocks mentioned above. The Motley Fool owns shares of Apple, Chipotle Mexican Grill, Imax, McDonald's, and Netflix. Motley Fool newsletter services recommend Apple, Chipotle Mexican Grill, Imax, McDonald's, and Netflix. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. Is this post wrong? Click here. Think you can do better? Join us and write your own!