Reader Responses To The Market
20-Mar-01 00:16 ET
[BRIEFING.COM - Robert V. Green] On the anniversary of the Nasdaq market peak about 10 days ago, we asked Briefing.com readers for their views on the marketplace, and particularly, their emotional reactions to the market. Here is a summary of the responses that were sent in.
Three Basic Reactions
We were overwhelmed with responses, frankly. If you didn't receive a personal reply to you email, please forgive me. More than 600 emails were received. Although we didn't perform a complete analysis of all the emails we received, there were several broad categories that many of these responses feel into to. We call these categories:
The Confessional
Blame Someone Else
Told You So
Sad, But Wiser
Here are some examples.
The Confessional
The email medium must be good therapy. We got a lot of "confessional" style emails where investors simply listed what they view as their mistakes. If it helps to write them, maybe it also helps to publish them for others. Here are a few:
We are stupid. We won't sell the lion's share of our beaten down portfolios. We have no clue that we're going to lose more and more, and at some point we'll be left with virtually nothing. I'm being brutally honest. We are really dumb.
I can honestly say that I went from surprised at rate of the demise of my portfolio, to a little mad, to sort of sad, to nearly depressed to my current state of complacency. Having been thoroughly humiliated, I simply have no emotion towards the market. I think this is a good thing though. My old high school baseball coach used to say, no pain, no gain. If that's true, I'll be next years biggest winner. At this point, my buddies and I now laugh at our losses! I think we're in hysterics. What else can we do.
I keep kicking myself for my greed last year. Why didn't I least take some profits. I'm disappointed in myself for not setting stop loss limit orders.
If you feel the way the above readers feel, take some comfort in the fact that you are not alone. This was by far the biggest category of responses we received, perhaps close to half of all received.
Blame Someone Else
A good deal of people are extremely angry, however. As with most angry people, there is a tendency to look for someone to blame. Here's an example, from "A":
My life has been ruined, I am sitting on the edge of bankruptcy. After 25 years of hard work, I am left with no money because of those who upgraded and down graded the stocks, it does not even make sense, one upgrades, someone else downgrades at the same time. How in the world they calculate their numbers?, how could it be possible that in one day, few analysts upgrade a stock and few downgrade the same stock? even in today's bad market there are analysts who are downgrading left and right, as if they don't do it they will be left behind, I am not angry at CEO of a company as I am angry at the analysts and brokerage houses that manipulated people and profited from them, put it in a simple word THEY STOLE OUR MONEY.
This sentiment, in varying degrees of vitriolic rancor, was expressed by many people. However, what really happened in situations like this is a mismatch of risk expectations. Investors simply took on too much risk, by definition. If you get yourself into a situation like that above, it means the risk potential was never fully understood. It may not have been explained, and certainly risk warnings seemed "old-fashioned" when they did appear. In fact, it was investors' own refusal to recognize risk that created the bubble in the first place.
We aren't arguing here that analysts aren't to blame. They fed the public's appetite. But everyone has to realize that "sell side analysts" are pretty close to salesmen for stock. Only buy side analysts have interests in line with the buying public, but buy side analysts don't publish their findings. Frequent Briefing readers know the difference between buy side and sell side analysts, as we have written about in the past on several occasions. (See the Stock Brief of March 16, 2000 Buy Side/Sell Side.
Told You So
A large number of readers sent in responses that fall in the "I told you so" category. These are investors who proudly proclaim the fact that they weren't hurt in 2000. Some even boasted on riding the great wave up, and selling at the top.
Here is an example of the many notices sent in of this type, sent in by ES, in Tampa.
I'm 72% in cash and have been for more than a year. The equities I hold have gotten pounded but the equities I trade for a dollar gain have made me money. Smart people have told me that 72% cash is ludicrous. My reply is "wanna bet?"
Another one along these lines is the following, from GP:
I never bought into the "new economy" hype and I always believed that the recent bull market was a bubble. My losses have been relatively small compared to my net worth. I actually get some satisfaction watching all of those "stock market geniuses" get crushed. I will sit on my cash and bonds until the NAZZ drops another 50% where it just might represent some value. I believe that we have witnessed the financial bubble of a lifetime and it will take years, if not decades, to repair the financial end emotional damage that will result from it.
Sad, But Wiser
By far the most intriguing emails, however, were those in the "Sad, but wiser" category. Here are three, from different readers.
I was and still am pretty clueless about price/sales, price/earnings, and other valuation metrics. Your articles have started to open my eyes to the risks in some of these. I held off today on loading up on some more MFNX, because I recollected that its price/sales ratio implies huge risk even at today's reduced price.
I've also seen our retirement investments shrink by 50%. That has led my husband and I to return to the job market. Our projections for the future have been reduced significantly. I do not doubt there are others such as ourselves. We are risk takers. The condition of the market disturbs me but I understand it. I also know that concern and worry are increasing among friends and neighbors so I believe the bottom is not far away.
It is because of this downturn in the market that I' ve been able to get more serious about due-diligence. I have several favorite stocks that I would like to own, such as FLEX; ITWO; TTEK ; ANF, and others, but at this time, I can't see making a move. I do my own journal daily about the movements in the market, but it doesn't help me gain any confidence in this market. I won't give up though, because after the smoke clears, there is greener grass to look forward to.
A daily journal is an excellent suggestion for all investors. At the very least, you should write down why you bought a stock. It does help later, when you think about selling.
Yet another viewpoint in this category is a recognition that the metrics of the market are changing, something we believe strongly at Briefing. Here's the way EL from CT expressed it:
The biggest lesson, that I'm still learning and will probably take a while? FIGURING OUT WHAT REPRESENTS VALUE. What's a fair price to pay for a software company growing 100%? 8x Trailing Sales? 10x Trailing? 3x Trailing? If we're going back to "old" metrics, I need to get familiar with them quickly! I've only been following the market since '92, so my vantage point is somewhat limited.
The truth is though, no one knows yet what the right value metric is. The market is still working that out.
Hangers On
Despite the legion of investors who have learned, the hard way, that buying on the dip doesn't work anymore, there are some who feel the market will return to its old ways. Not likely, in our view. 1999 was the year of momentum because every investor thought stocks always go up. They know better now.
But there are investors who simply refuse to believe it has happened. Here's an example, from a 37 year old who claimed his account peaked at $1,000,000 and has declined to $400,000 now.
So the NASDAQ is down over 60%. This is fact. The analysts attribute this to the foolishness of the past. I suggest this is due to the foolishness of the present.
Frankly, until the last investor who feels this way has changed their minds, the market won't have bottomed.
Comments may be emailed to the author, Robert V. Green, at rvgreen@briefing.com |
