Recs
By Rich Smith (TMF Ditty) | More Articles August 4, 2011 | Comments (16)
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OMG!
Oh, spit!
The sky is falling!
Stop. To steal a line from Cameron Crowe's 1989 Say Anything: "You must chill. You must chill."
Yes, I realize that the market's imploding. I get it. Over the past two weeks, the Dow Jones Industrial index has lost nearly 10% of its value. Yesterday, thanks to a brief relief rally, the Dow just missed posting its longest consecutive losing streak of the past three decades. But while up one day and down the next, the net effect is a lot of pain for a lot of investors.
Scanning the Fool headlines for today alone, we find Walter Energy (NYSE: WLT ) down 25% on an earnings miss, Western Refining (NYSE: WNR ) down another 20% on its own Q2 disappointment, and Dendreon (Nasdaq: DNDN ) topping 'em all -- plummeting 65% on the news that -- shocker -- not everyone can afford to pay $93,000 for its new cancer treatment. And while I'm fortunate enough not to own any of these particular bombs, I still feel your pain. My shares of Micron (NYSE: MU ) are today worth about 20% less than what I paid for them just a few months ago -- and Micron didn't even report earnings! Collectively, we as investors have just seen nearly four months' worth of gains -- wiped out in a matter of days.
Scary.
Yet if you're reading this, it means I'm still typing. I haven't jumped out any windows. (Not that it would help. I'm on the ground floor.) That sort of dramatic overreaction doesn't help. Panicking as your stocks plummet won't slow their fall, and it won't salvage your portfolio -- it'll just lock in your losses.
Well, what should we do?You should thank the good Lord for days like today, and like May 6, 2010, which provide object lessons in the volatility of the markets. Maybe it was the crisis in Greece that caused last year's "flash crash." Maybe it was the debt crisis, or the half-measures that averted it, that caused today's selloff.
Whatever the reason for the market's sudden bout of volatility, it does at least remind us that asset prices can go down as well as up. Otherwise, we might do something stupid -- like, say, pay nearly 400 times forward earnings for a share of salesforce.com (NYSE: CRM ) . Or buy a $200,000 house for $300,000, finance it with a no-money-down subprime ARM at 2% with a six-month balloon payment, and then wonder why we can't afford the mortgage when the rate resets to 6% and our monthly payments suddenly triple.
Hypothetically speaking, and present company excluded, of course.
No, no -- what should we do about the stock market?Oh, right. Well, just keep on doing what you've been doing. I did say "present company excluded," right? So keep collecting and depositing your paychecks. Keep researching high-quality, low-priced stocks. Keep buying shares at a significant margin of safety. And, as always, keep purchasing no more of any given stock than you can afford to lose. (Because, after all, we all make mistakes from time to time.)
Once you've got that down, though, it's time to get greedy.
Greed is goodSee the opening lines of this column up above? A lot of investors are saying things like that right now. Even the pros are panicking. The hedge-fund types? They're worrying about making their quarterly numbers, and they're selling out of positions they love, in a frantic attempt to staunch the bleeding.
Meanwhile, you should consult your stock "wish list" -- you've drawn one up, right? -- and see whether the panic selling has pushed any of your favorite stocks down below your hoped-for buy-in price. Today just might be your lucky day.
Further fearless Foolishness:
Fool contributor Rich Smith owns shares of Micron Technology, but he holds no other position in any company mentioned. Check out his holdings and a short bio.
The Motley Fool owns shares of Western Refining. Motley Fool newsletter services have recommended buying shares of salesforce.com. Other Motley Fool newsletter services have recommended shorting salesforce.com. Try any of our Foolish newsletter services free for 30 days.
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Good reminders overall Rich, but I need to warn you that your title is trademarked and copyrighted. If the economy continues to tank, I may take my meager funds and hire a lawyer and get some of it back for copyright infringement.
TSIF (The Sky is/isn't Falling Today)
(Depends on your perspective....I have both copyrighted just in case). ;)
"Once you've got that down, though, it's time to get greedy.
Greed is good
See the opening lines of this column up above? A lot of investors are saying things like that right now. Even the pros are panicking. The hedge-fund types? They're worrying about making their quarterly numbers, and they're selling out of positions they love, in a frantic attempt to staunch the bleeding."
Two comments: (1) Greed got us into the mess we are in today; (2) I fear your advice will prove to be far more glib than it is wise; this isn't 2008
The worst problem with today is that it is NOT a flash crash. Other than yesterday, it's been going down for 8 sessions. The passage of the debt ceiling bill did not even give the market any lift, showing us that market had already priced in the passage, and had no confidence in Europe as wella s domestic job and growth prospects. i don't believe it reached the bottom yet, and I'm not getting back in until there is major life signs.
TSIF: I defer to your claims of prior copyright and higher CAPS score. My deepest apologies.
TMFDitty
I have not understood any of the booms in the history except basic needs or imaginations to be fulfilled. Actually all these recessions and problems in Europe are good. This will make people think how to build economy vs keep riding some kind of delirium. Some said Greed is good and in the same place the guy's Dad after his jail thing that now you will do some good work. Our health sector is totally corrupt and so is the Govt. but historical there has never been a change without radical shift and I don't see that being possible in next twenty years. USPS wants to shutdown shutters and I don't know how will Meritline will ship their trinkets. I don't know why junk worthy news papers are thrown in-front of my drive-way. We have stop wasting paper or stop wasting every thing. We have Mayor in Houston who I don't think is worthy of any Financial planning except competing with Sarah Palin and they you blame her for recession. Barak Obama is a lawyer not wealth creator and Warren Buffet is wealth collector not distributor.
Yes, I did thank GOD, consulted my wish list, took the $14k sitting in my Roth and added to my MCD and WM. There will always be hamburgers & fries, and garbage to collect and recycle.
I'm just 3 weeks new to the whole investing thing - sorry guys, i think i broke the market.
I have read in many places that one should set a stop loss (mental or GTC) at 10%. I'm curious, because nothing i read in TMF seems to advocate that. What is the general consensus?
It's time for the world to learn, the "secret code" can achieve a 90% accuracy rate within the oil market. What I'm trying to do is wake you up so that you can see that you can make as much money as you want within the oil market by using the "secret code". There are so many scams on the Internet, 95%+, that people don't believe what I say, so here is the proof, shown live with NO POSSIBLE WAY to fake!!
Google "Oil Trading Academy".
The sky is falling? Again? Wow. It was really good for me the last time that happened. I hope it's even worse this time.
So a few days ago (it was Monday) one of my coworkers was working a double, so she wasn't leaving at 1PM like usual. She was staying until close.
I said, "Why did ___ want off this time?" (He's a young guy - likes to get off and party. She was working for him)
She said, "I didn't wait for him to ask me this time. I wanted some more hours this week, and I asked him if he'd like to be off today. That gives him a 3-day weekend."
Me: "Wow. The market's tanking. I want some dry powder. I wonder if he'd like to be off Thursday? You know, Thursday's truck day. I bet he hates truck day."
hehe...I worked 68 hours this week. I'm gonna do it again next week. That ___, he's kinda handy to have around. Our boss doesn't care - as long as the shift's covered, she lets us do this kind of thing all we want.
WHOSE sky is falling?
Not mine.
All you sky-is-falling people, thank you for 2008 and 2009. Keep up the good work.
@rodnog: Don't worry about it. We bought the extended warranty. (And the stock market repairman promises he'll be here within an 8-to-12 month window.)
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