Every day the sky is falling. The economy is in the shatter, unemployment is highest in over a decade, stocks are falling, marquee companies are failing and no amount of bailout money seems to help. Stocks sell off constantly and there seems to be no end in sight. Brief rallies are obliterated by profit takers only to have stocks fall way more than they clawed their way up the day before. Jesus, even Warren Buffet, the Oracle of Omaha, got his ass handed to him last quarter!

But hey, I’m optimistic. I have to tell you, it’s lonely these days. I feel like the Last Bull out there.

I probably shouldn’t be with all the red going on in my portfolio. I took a shellacking when the commodity bubble burst; I’m still walking funny from what natural gas producer Chesapeake Energy did to me earlier this year. I have about three positions that were meant to be short-term trades but because the market tanked they are now “long term investments”.

How can the average investor eek out any returns when the greatest investor of all time and the market in general can’t manage to make things work?

Maybe I’m a glass half full kind of guy, but all I see is opportunity. Companies are selling at huge discounts to what they traded at a few months ago. Not just the dogs either; name branded pillars of capitalism are going at cut-rate prices! McDonald’s. Caterpillar, Coke, Pepsi, Exxon and GE are up for sale at bargain prices. Will they go lower? Sure, maybe in the short term. But if you can look me in the eye and tell me GE will be lower in 5, 10 or 15 years than it is today. . .well you’re an idiot!

If you haven’t had the pleasure, read Benjamin Graham’s “The Intelligent Investor: The Definitive Book on Value Investing”. Graham was an economist and professional investor who is credited as the first proponent of value investing. It provides a framework for investing in companies that are quality buys due to their management and competitive advantages while ignoring the lemming / herd mentality of the market. Graham’s most famous disciple? None other than Mr. Buffet himself.

The best lesson to pull from Graham’s works is the personification of the market; Mr. Market, he calls him. This guy is bipolar! He will show up at your door one day wanting to sell you something for way more than its worth, and then the next day try to sell you the same thing at bargain prices. The trick with this ass hat is to figure out when he’s messed up and is offering quality companies at discounted prices.

By doing a little security analysis and reading some annual reports this is pretty easy. You can make Mr. Market your bitch with a little work and discipline.

Queue the Naysayers, “Oh but it doesn’t work. Look at Buffet. Look how bad last year was for Berkshire-Hathaway”. Warren did have a bad year, but the guy is a self made BILLIONAIRE! Chances are he knows a little bit more than you or I. And where did most of Berk’s loss come from this year? In unrealized losses on a derivative contracts Buffet wrote for 20 years out. In plain English he placed bets that the S&P 500 would be higher in 15 years than it is today, but because of accounting rules has to value those positions. So it’s all losses on paper.

Again if you think the markets are going to be lower in 15 years than now, please raise your hands and I shall have Brad come by and hit you on the head with a tack hammer because you are retarded.

So what’s the average guy to do? Keep on putting money in your 401K’s; get all the free money your company will match. If you have investment money besides that in your budget buy quality companies that have good management and the market is discounting. For a recession you can’t go wrong with McDonalds, Wal Mart, Pepsi, Coke, and Exxon. If you’re lazy and don’t want to do an hour a week of homework then buy an index fund or ETF that tracks the S&P 500 or Dow Jones. As these indexes recover your money will grow!

If you insist on being a negative Nancy and feel the need to panic and sell; go right ahead. I will be waiting in the wings to take advantage like a frat boy on a drunken chick with low self esteem and daddy issues.

At the time of this writing I am long Chesapeake Energy, McDonalds and Caterpillar.