Selecting the theme to these comments is always difficult. This issue was between Santayana's "Those who do not know history are destined to repeat it" or King Solomon's "There is nothing new under the sun". Perhaps I'll use both...let's see.
It's interesting that everyone on the planet, except those that know history, are asking if the Bear Market is over, when recent (the last 80 years) history tells us that the average Bear Market lasts 20 months, not the 12 months that this current one has growled. True, one can argue that if the average is 20, then there should be some shorter and some longer, so maybe this one is of the shorter variety. If that is the argument, then we must take an average of the worst Bear markets, since never in history have we been in the dire straits we currently find ourselves. If that measure is taken, the average would push 30 months. Global history demonstrates that government intervention doesn't work over the long term, regardless if it can create temporary trend changes. South American and Asian governmental currency devaluations, Japanese governmental bailouts of stock and real estate markets, US bailouts of Long Term Capital Management, Bear Stearns, AIG, Fannie, Freddie, and the ongoing attempt to save our raped and pillaged economy, among the few off the top of my head, didn't work over time. To blame our predicament on the government allowing Lehman to fail, or on Presidant Bush, or on any single event or person requires a level of denial and or halucination of the pathologic variety.
The only way to change the effect is to change or eliminate the cause. All the bailouts to date, stimulus packages, money market guarantees, money printing, global credit facilities, etc. (I can't even remember all the "too little, too late" fixes they've tried in the last year) have rallied stock markets for shorter and shorter time frames as the situation worsens, including the two-day wonder of a rally that ended in Tuesday's open hour. The global monied elite know how to sort the chaff from the wheat, and don't need CNBC or FoxNews to tell them what these manipulations mean to their capital. The fact that the monied elite continue to sell every rally on every new desperation tells us that none of the moves so far are worth believing in. By definition, if they were believable, the market would be rising rather than falling.
Investing is just that simple, usually, as evidenced by the well know market motto: "Buy low, sell high". Anyone that tells you they can actually do this, without showing you the audited statements to prove it, is lying. As we all know, it's hard to "buy low", because it's hard to tell how low is low. Even harder, "selling high" is something we are only told about after the time WAS right. Here's the psychological rule that has served me well over the years, which plays a large part in my decision support system. The crowd mentality or direction is the red light (sell) or green light (buy). When everyone is happily bragging about their genius and its results on their portfolio, I like to sell. When the same crowd is moping about their losses, I like to buy. As I always heard in the halls of the psych department, "moping ain't coping". Coping means taking action. Action is a cause that leads to an effect. If you aren't happy with the effect, change the cause. It's that simple.
The bottom line is that we must take responsibility for our actions in all facets of our lives. We cannot be masters of our domains if we rely on other for financial decisions. If we don't understand the game, we shouldn't be playing. If we can't afford the risk of loss, we can't afford the reward of gain. The sword had two edges. For every action, there is an equal and opposite reaction. When we attend the leverage party and stay too long, we can't be surprised at the consequences. They are typically as intensely painful as they were intensely pleasurable. Ying-Yang. Seven years of plenty are followed by seven years of famine.
Buy low, sell high! Are we low here or high? If neither, then find a level that is low to buy, or high to sell. Keep it simple...trust noone, but if you do trust, verify.
For what it's worth,
Ken
Subscribe to:
Posts (Atom)