Tuesday, November 18, 2008
Shaken, Not stirred.
by John Audubon
item #: 11726055A
Yesterday I conquered the leaves at my home. When armed with a back pack leaf blower, it was easier than had I had a rake as my weapon. We lit them off in the cool evening. But after 3 hours, I was tired of constant motion between blowing and raking, I slept very soundly. I'm pleasantly sore this morning.
I turned on the TV at a.m. :and saw a fund manager (Invesco) stating emphatically that investors should not let themselves be shaken out of this market. I was still half asleep--so much so that I managed to make coffee without the coffee. As the maker started its brewing cycle, it occurred to me that I had no memory of putting in the grounds....reset. Start over.
The picture of the crane looming over the poor hapless reptile reminds me of how the current market is looming over investors. While I felt somewhat prepared for the unfolding of events--and even had conviction about the nature and direction of those events--now that they have unfolded, I realize that I underestimated the magnitude.
Rev Shark (Jim dePorre) on Real Money often says that markets go up further than you think, and they come down further than you think. That statement has been true in spades on both sides of the boom/bust. To be fair, we've not seen the end of the bust. And though I've heard it, I cannot say that I've internalized it well. Though I've had some choice short positions, I've not held onto them well. Those robust bear market rallies are very tempering!
To say that these markets are unsettling is an understatement. I admire folks who can 'trade' them. Other than very small exposures for some exposure to market direction (short/long), I have neither the experience nor the temperament to 'trade' this environment with any skill or confidence.
But to get back to the comment of "investors should not let themselves be shaken out of the market". . . . cutting one's losses is endemic to prudent (and successful) risk management and capital preservation. I find it amazing that the advice given for equities is counter to the advice that one would given in any prudent business decision.
What investors SHOULD get shaken out of is their complacency, and they should not be stirred to act in an environment where uncertainty is high and risk is not easily quantifiable.