Here in the United States, the household savings rate has stayed below 2.5% since 1999, according to our friends over at The Economist. Instead of stashing our money in savings accounts, we spent with reckless abandon and used our homes as savings, borrowing against their ever-increasing value whenever cash was needed.

But now that the stink has hit the fan, the once unstoppable American spender is doing something quite curious: playing it safe with his money. And he’s certainly not buying stocks. One look at the crashing yield curve says it all. No-interest 90-day T-bills are flying off the shelves…

Of course, the same folks who are buying Treasuries and stuffing money under mattresses right now are the ones who were telling us house prices would never go down and subprime was nothing to worry about. Looking back even further, these were the same people frantically buying stock back in late 1999, when the global price-to-earnings was 35.

The Economist writes that when American P/E ratios are low, returns on equities over the next 10 years average 8%. And when they are high, returns average 3%. You can’t argue with those numbers. The time to consider stocks best is while everyone else’s back is turned. We’re looking at a global P/E near 10 right now…opportunity awaits.

Follow the Crowd and You’ll Miss Great Opportunities…

For every brilliant idea, there’s someone waiting to call it a blunder. Many people consider the light bulb to be one of the most important scientific innovations of the last hundred years.

But this wasn’t always the case. To some of the greatest scientific minds of the late 19th century, Thomas Edison’s light bulb was a foolish toy…

“[The light bulb is] good enough for our transatlantic friends… but unworthy of the attention of practical or scientific men,” decided the British parliamentary committee in 1878.

In 1880, Henry Morton, president of the Stevens Institute of Technology, claimed “Everyone acquainted with [the light bulb] will recognize it as a conspicuous failure.”

Looking back now, we see these critics as fools. The light bulb became the founding invention of Edison’s small business venture — a company we know as General Electric. As gratifying as Edison’s victory was personally, the financial windfall for Edison and his early investors, including J.P. Morgan and the Vanderbilt family, helped create some of the greatest fortunes in history.

Are there more brilliant inventions out there for the taking right now? You’d better believe it…

Best,
Greg Guenthner

December 22, 2008

Greg Guenthner

Greg Guenthner uses his experience as a former journalist to dig up the hard-to-find headlines that could lead to big gains for your micro-cap portfolio. Greg offers his readers the scoop on topics ranging from alternative energies to biotechnology, digging up the best penny stock opportunities before they’re discovered by the mainstream media. On top of contributing to Penny Sleuth, Greg also heads Penny Stock Fortunes and Bulletin Board Elite.

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