Whenever you read or hear an investor crowing that "valuations are the lowest we've seen in years--we're buying bargains everywhere"--and if you're like me you're hearing this a lot--ask yourself "Buying with what?"
There is an enormous difference between the investor who was fully invested going into the crisis and is currently selling stocks (that have almost certainly gone down) in order to buy bargains, and the investor who held cash, or maintained spare borrowing capacity, or had in place a disaster hedge going into the crisis and is now deploying that capital to buy bargains. It's not really a bargain if you have to pay for it with realized losses on other investments.
I hope to develop this into a longer post on asset allocation soon.
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