Investing in misery

Commentary suggesting the Japanese disaster presents a buying opportunity for investors has been slammed by some readers as distasteful.

But profiting from another’s apparent misery may be a hidden demonstration of altruism writes Ken Eisold.

Generally, investing in anything is a vote of confidence and a gesture of support.

The investor is betting that the investee will be doing better — and he will too.  And, in fact, when prices are down, it helps the investee in two ways:  injecting more funds and telling others that you have confidence, encouraging them to invest as well.

The morally questionable matter is short selling.  In the rough and tumble of markets, that’s part of the game, but then there are times when it can really hurt.  Banks and investment firms suffered from short sellers during the credit crisis of 2008, and it may well have contributed to the bankruptcy of some of them.

The smart and moral thing to do is to invest in stocks that have become bargains but will, you have reason to believe, rebound.  That will help them — and in the long run you too.

That may feel “counter-intuitive.”  After all you are getting a bargain at what seems like their expense.  But most firms will  actually welcome it.

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