"It can't happen here continued..."
Interest rates are low, but look what happens when there are simple rumors that the FED is going to tighten interest rates One of these days these rumors will become a reality - not a bear market, but certainly a correction will ensue. The danger, however, is that this rise might coincide with other events that could multiply the effect way beyond what the FED might intend. Have we all forgotten how three events throughout the world effected the price of oil, and what this did, indiscriminately and without concern for "fundamentals" to an entire stock sector? If it doesn't scare you it should. We have some seasoned investors on this thread who understand the risks of the market and look how we reacted. How do you think that taxi driver is going to react if 50% of the value of his life savings evaporated into thin air over a three month period? Remember, everyone is used to those "big" corrections happening, and the market starting to recover within days or weeks. What if this time it doesn't bounce back like everyone is "used" to. What if this time it's like stepping through a door, and suddenly realizing there's nothing but air under your feet (with apologies to whoever posted that back in December)? We at least had the knowledge that our sectors fundamentals hadn't changed, and that the punishment we were taking was completely irrational. The broader market has no such assurances. In fact, in many instances the opposite is true. I challenge anyone to justify paying $118 per share for Yahoo!! The world hasn't changed that much - a tulip bulb is still a tulip bulb.
Now I have no intention of running out on Monday and converting all of my stock into CD's, but I did learn a valuable lesson back in December, which I am not going to let go to waste. I still have red in my portfolio when I bravely decide in December that I was "drawing a line in the sand" and holding on to GW and PTEN come hell or high water. Well folks, hell is no fun. I'm going to trade the drillers and I'm going to make good money and I'm going to have a very itchy trigger finger, because I've learned to watch my ass and to manage my risk. Buy and hold. Yeah, right. Warren's got a lot more money than I do.
Now, let's make some money next week!
Alex |
