This is a great video about the subprime mortgage crisis.  I stole it from a post on Tim Ferriss’ Blog which I very much encourage you to read.  I enjoy it because it takes an intelligent look at how people should invest.  Investing is a very funny topic, because everyone has a view on it and 90% of those views will not make you any money (mainly because most “investors” are far too hyperactive).  Tim likes to learn new topics in an intelligent way, and has taken much time to study the most effective way to learn a new subject.

What struck me most from Tim’s post, and another post I read today by Mark Cuban,  is the power of cash in times where the stock market is plummeting and financing is nearly impossible to obtain. Tim is extremely conservative with his money and is keeping it almost all in bonds right now.  Mark, on the other hand, is telling Yahoo, who has an abundance of cash, to be acquiring at a wild rate right now.  I disagree with Tim, and agree with Mark.

Holding bonds while waiting for a good investment opportunity to jump at you is generally a fine idea, and it’s something that Buffett does while the market is riding high and he can’t find any opportunities.  But at this particular moment in time, the market is offering unheard of values.  This is the investment opportunity that should be jumping at you. Tim’s looking into venture capital proposals, which is certainly a fine idea, but to give this bond-holding advice to the general public is Ill-timed.  Furthermore, most readers of his blog probably don’t have 1 million in cash lying around to be able to take advantage of venture capital opportunities.  Those people should not be invested in bonds.

I have stated before that now is the time to jump into the market because it’s as low as it’s been in many years, and you can snag some fantastic deals, even if you just jump into a low-fee S&P-tracking ETF and leave it at that.

But whatever you do, the credit crunch is making cash in general more valuable.  All items are becoming cheaper, and thus currency itself is worth more, because you can get more for each dollar.  But once the credit crisis is cleared up (2010? who knows..)  The value of what you can get for your dollar will decrease quickly.  Things will return to normal.  What does that mean for you?

Convert your stupid dollars into some other value-carrying form soon.  Don’t be overly risky in your investment choice, because you can take advantage of this pendulum swing in value by investing in almost anything that will continue to be valuable in the future. Blue chip stocks are a great idea, because they are normally priced at a premium.  Now is a time when you can afford to buy a fantastic company at a fantastic price.  Don’t wait too long or things will see-saw back to normal, and the opportunity will be lost.

I am not an investment professional.  I take no responsibility for your actions.  I’m irresponsible, and you shouldn’t listen to me.  Listen to someone like Warren Buffett and make your own conclusions.

When the market is this fearful, you can even earn a good amount of money by investing in blue chip stocks, the most reliable (and usually more expensively priced) companies out there.  When the market panics, they sell everything, completely irrationally.  Nobody cares about value any more, they’re like a bunch of lemmings running off a cliff together.  The smart money is investing now while the market is low – that is how you build real wealth.

Let me emphasize that I’m not saying the market will go up immediately, and I think it may very well go down even further.  But buying here, I think that in 3 years, you are bound to have made some money.  Quite possibly a lot of money.

Disclaimer: I’m obviously not an investment professional.  I take no responsibility for your investment decisions.