So things are at best struggling and Cisco looks like it is going to wreak some havoc because of the guidance.After a couple of lousy days maybe the Cisco hit (if it even lasts until the open) can turn around in some sort of oversold-ish snapback. I don't know but fear seems like it has inched up a tad this week.
I saw Louise Yamada on Fast Money (CNBC Asia was preempted, maybe its Golden Week?) and she had all sorts of ominous things to say about the market.
Who knows? We all have opinions but who knows?
One aspect, the only aspect really, that matters about the type of pre-planning I have preached about in the past is the extent to which it relieves having to make decisions when it is hitting the fan. What I mean by this is that in planning ahead what you would do when the bear market comes you make the decisions ahead of time, you simply need to execute them when things are hitting the fan. Not having to craft the strategy now, or a month ago, makes it much easier.
Emotional responses are the downfall of many a market participant. Knowing this it seems only logical to remove the threat of emotion by mitigating it long in advance. I have had roughly the same plan since before this site started and have written about so much that I probably lost readers as a function of the repetitive nature of the posts but now that a bear appears to be a couple of months old you can get some sense of why I wrote about this sort of thing so often.
Any sort of defensive action taken with any reasonable catalyst has probably been a help. Of course the other thing is that bear markets are normal and this bear will end, giving way to a new bull regardless of anyone's ability to know when or how bad it gets first.
I can't begin to express shoulder shrug this evokes because it is just a part of the cycle just like you know that most of the time you are not sick with a cold but you know you will get one at some point in the future or unless you wash you hands 100 times a day or never leave the house (kind of guilty myself, I haven't had a cold in quite a few years; try oil of oregano as soon as you feel one coming) which would be the investing equivalent of just rolling t-bills or CDs.
15 comments:
Roger,
Don't stop the repetition; it's helpful to have a mast to hold on to as the storm really intensifies.
I spent some time with the article referenced by "Sudeep" at the following link:
http://blog.inman.com/LeamerHousingandBusinessCycle.pdf
It is well worth the effort, and may also help strengthen our collective grip on the knowledge that these things (recessions/bear markets) end. The article also points towards the leading indicators that signal recovery. Unfortunately, housing is the key leading indicator.
I'll certainly leave the conclusions to individual readers, but it's safe to say that how the market discounts the recession and it's end will make for some very challenging trading decisions going forward.
R in NY
When I first found your blog, I went back to 5-06 to see how you handled the correction. The answer, very well. I had been listening to Cramer at the time and he had thrown up his hands in surrender, just exactly at the bottom. My personal result, I gave back 55k recent gains. I then tried the world index funds at the next top. After losing about 2-3%, I went back to the money market. I'm still there except for a double short that I seem to use as entertainment. I'm waiting for some more correction before phasing into the Roger Style. You represent substance over style. Thanks much for your help. charlie
thank you for that charlie. navigating through over the long term is an evolution of process to be sure and everyone finds their unique path but preventing emotions from getting out of hand ahead of time seems to be a pretty good idea.
After many weeks of sitting on a pile of cash I just placed 2 moderate positions in 2x funds.
Recent market behavior and the sentiment indicators finally look and feel like a bottom of sorts. I expect a multi-week rally to commence shortly - but will use mental stops 1% the recent lows.
I still think we're in a bear market, but even bears get tired from time to time.
aka feel good rallies, there will likely be more to come, if this is the bear market i think it is.
I raised some cash today - lol!
Problem is, there's nowhere to go with it. I'm bullish the dollar, and bearish everything else. As an aside, my "high interest" savings account has gone from 4.8% to 3.8% to 3.55% in two weeks. Oh the humanity.
Well I will say I think your shrugging is foolish. I am frantic.
Frantically trying to raise cash to put it into the market. Oh how I regret my new car payment. I could be getting that money in now with some real chances at moonshots. I want broad long exposure. This is like the prototypical case from gambling theory. Makes lots of small bets when the expectation is positive on each one, and right now positive value expectations abound. I'm too conservative by nature to get a margin loan, but good grief is it tempting.
if i am foolish for not panicking to sell or buy, so be it. frantic is never a word i want to describe decisions made about the portfolio.
On the subject of feel good rallies, aka bear market rallies, this is from FT and they have a good short film w/graphs about them.
Click on "Jan. 31 Bear market rallies'. There also is an interesting 'short view' about the US economy turning to deflation like Japan instead of the suspected stagflation as a result of Fed cuts.
Sorry, forgot the link:
http://tinyurl.com/23n7og
the positive reaction in csco's stock today despite the bad news seems positive. it is better to buy when stocks stop going down on bad news.
buying on that catalyst relies on quite a bit. primarily it relies on on brief sequence to tell you whether it is "safe" to go back in.
if this is bear market (investors really nned to decide) then it is unlikely that the bottom is in after 4 months.
looks like a bear that may still rally from here. Until then it looks like it will frustrate most people imo
I don't understand why people are frustrated.
Traders have a lot of volatility to play with, so they can be happy with their game. And investors like me can build positions in things that had become too expensive in 2007.
Were there really people that thought goog was worth $700. Or oil worth $100. Of course not, and people playing the trading/speculation game were properly hedged. Lost a little at the end there, but probably made enough during the run up and down to make up for for it.
Generally stocks are a lot cheaper. This can be deceiving. In bull markets this is a signal to BUY.
In bear markets they may get a lot cheaper yet. This may be a time for traders to buy, but long term purchases may be better down the road IMO.
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