Bad Behaviour

Got out of WFR two days ago deciding to "keep what's left" and got back in today wanting to not-miss-out on a rally. I haven't done this in years. This should clue you. My emotions are starting to pick up. I've said the big players won't get back in until the little people really sell - so they can buy at rock bottom - and, the next day, stocks will open so high that the little people would have missed out anyway. Anyhow, I've decided to pull out completely. Oct is a free trade month on Zecco - so I can get out without commissions - got to make the most of it.

What's different about what's going on now versus just bad stock pics? In the case of the latter, you probably didn't anticipate a competitor that would put your company out of business, or you didn't anticipate a sector downturn because a particular technology went out of vogue - or something specific like that. What should have clued people here was the big names folding - Bear Stearns was the big one. That actually was warning enough. What is going on IS different - we've seen 150 year-old institutions like LEH give up. MER doesn't exist. Morgan Stanley is finished. This is as different as it gets.

And why is the economy going to be bad - it's because a good economy is where there is healthy consumer spending. Except, in this case, the spending is over. People (like me) spent money when it was easy to come buy - and that led to more houses being built. So, the houses are the assets that exist. For the next 5 years, there won't be any spending because the spending is over. In my case, though I didn't acquire tonnes of assets, I was lax over the last year - averaging down on bad buys - based on the value of my portfolio. I thought I was rich based on what people were willing to give me for what I had at a certain point in time. That's not a good standard. There is no standard - even if you own gold, what you can get with that gold can decline as time passes.

I honestly don't know what the answer is. One lesson I plan to take very seriously from now on is that trendline violations are very serious. Don't think you're getting a bargain. You think you're getting a good deal, but you could be in for a shock. If a stock is in a healthy uptrend, think about buying into dips - and setting very tight stops.