Hello all. Thanks very much for your continued patience with me and the thread. My studies have been intense and my trading has been light during the year. Given the added perspective I have gained from my self-imposed distance from the market, I will say this:
One of the greatest assets you can have for the stock market is Objectivity: it buys you patience and helps reduce the occurrence of ill-timed, market-pressured decisions.
With it, I extricate myself from the trader's frenzy--the same frenzy that causes a hyperactivity of trades that causes over 80% of active traders to be losers in the stock market.
For the first time, I will say that I have been able to look at the market through the same perspective Warren Buffett has preached, and that is to turn it--the Market--off. For an active trader, I know that that is the equivalent of professional suicide. Therefore, it is a pill I believe only a few will even attempt to swallow.
I would not even have considered such a view just a year ago when I too joined the traders' fray. Though still early, I can already see some of the benefits of distance.
Here's a little observation: one's propensity to trade is directly proportionate to how closely one keeps the market's pulse. As a result of being too close to the market, one may find that the well-researched and rational analysis that led one to open a long term investment position, is suddenly thrown out the window in order to catch a bit of the hot money a friend or associate told you about.
Gone is the objectivity and patience required to let the seeds of your investment take root and fully bloom. I know some friends who have abandoned the dormant, attractively priced issue in order to catch the newest craze in the market.com.
So what has happened to those companies' stocks that have slowly, but surely benefited from a management team that continues to execute its vision? The same kind of stock that only until recently has behaved like a turtle in this market full of hares--the ones that only the patient has benefited from? Let's take an example like Perle Systems.
A year ago, when it was $1.625, I pointed out its virtues on a longer-than-usual post, backed by both Fundamental and Technical Analysis. It is up by a modest amount--about 100% over the past year, especially when it nearly reached the $4.00 level just a few days ago (my target was $4.50 within a 1-2 year time period--still on track). And all without the stomach-turning caused by recent market gyrations. Or how about EQNX after it got taken out and slaughtered after the earnings warning--up over 40%.
The downside had been so stamped out of these issues, and with such pessimism, there was nothing but opportunity to exploit. And guess who is there to take advantage of these opportunities--the one who has been able to get out of the market's frenzied way of thinking and into his own, independent way of thinking--free of the burden of the quick decision, free of the need to have to quickly invest outstanding cash balances, and free of the pressures that have caused fund managers to make poor decisions, which in turned have caused them to underperform their benchmark yet again by a huge margin (about 88 percent failed to beat the S&P 500 in 1998--the worst year in a decade according to Smart Money Magazine).
That's too bad. Perhaps if one took the road less travelled, one would find results that differed from the status quo.
RT |
