Great Time to Invest According to Martin Whitman

It's a great time [to invest]

-- Martin Whitman, on the current market meltdown

Others may not quite share the enthusiasm but Martin Whitman, speaking at an investment forum in Toronto yesterday, thinks it's a good time to invest and reckons it's similar to 1974:

"We can't try to pick the bottom, but it seems to me that there are great values out there now, just like in 1974," the firm's co-chief investment officer said in an interview.

The stock market crash of 1973-74, which affected all the major stock markets around the world, lasted 694 days before bottoming out.

"Everything went down every day, and if you bought, you hit a lot of 10-baggers," recalled Mr. Whitman. "I hope that we do it with a lot of what we are doing now."

One may recall that the 1973/1974 period was marked by a severe recession, with commodity prices going out of control. This time, however, we have a real estate bust, along with a potential credit contraction. If I recall correctly, the big bust in the stock market back then was in the Nifty Fifty. Right now, the bust is anything to do with real estate, and financials in particular. The interesting thing right now is that the economy is not bad.

Nothing new in the article for Martin Whitman followers but it's always good to get his feel on the situation.

"If the value is compelling enough and the businesses have staying power, we just buy and don't worry about the market," Mr. Whitman said.

"Our turnover is about 10 to 15 per cent a year at most, and the majority of our exits are companies that get taken over rather than a sale."

Synchro, a reader, or other non-value investors will never comprehend what Whitman does. He, like most value investors, buys without considering the market behaviour.

Whitman leaves us with the reassuring words immortalized by Benjamin Graham:

It's worse than the U.S. savings and loans crisis in the 1980s, Asian currency crisis of 1997 and the collapse of hedge fund Long-Term Capital Management and the Russian default crisis in 1998, he said.

But, he said: "This too shall pass."