Investors Are Like Children

No, I don't have any children; I'm still searching for love. But that doesn't stop me from viewing investors as akin to children. The little ones, as the stereotypical views portray them, are prone to asking the following during road trips: are we there yet? They do this not once, but a million times, after seemingly every change in the scenery. To say it's annoying is an understatment.

Now, is it just me or are investors prone to asking 'is this the bottom?' They do this not once after some careful deliberation, but seem to constantly ask during every market turn--either up or down. Although I choose whether to read/listen or ignore someone, I nevertheless find this highly annoying. It seems an inordinate amount of ink and bytes have been expended trying to answer this question after seemingly every change in market sentiment.

Is there an answer to the question of whether we have reached the bottom? Sure, there is. The correct answer, as is the case with the kids' question, is that we will know when we get there. Until then, it's more productive to occupy your mind with something else or to enjoy the scenery...

Comments

  1. Except those of us who are short who keep saying "I hope we're not there yet!"

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  3. It is important to enjoy the journey.If you don't you'll miss out on a lot of learning opportunities along the way.

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  4. Good luck with your short anonymous... are you short the market or select sectors? If you sold short many months ago, you are fine (probably sitting on 20% gain?). But the market is going to get tough for both the longs and shorts. For shorts, days like today when the market rallies hard on higher inflation must make it tough.

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  5. I'm currently short and getting knocked around. I've been forced to buy in a small part of my position. My short is based on macro economic factors but the execution is following a very simple relative strength system which keeps me out of the market about 1/3 of the time. Back in at periods of maximum optimism and out again at period of maximum pessimism. Therefore i'm out during the ride from pessimism back to optimism.

    I'm short BKX and QQQQ. I have made some money on the BKX but not yet on the Qs. Right now i've given back the gains on BKX but i'm relatively sure over the few months i'll be able to close out at a profit. I don't understand the strength in NASDAQ. My position is that we'll see below 40 on the Qs before this is all over.

    There are 2 interesting points about this. I'm a long term, fundamental value investor. Lots of finance and accounting. The short position was supposed to offset the short term risks in these positions. Instead the shorts and longs are moving together. The 2nd interesting point is how much work shorting is compared to long term buy and hold!

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  6. anon: "I don't understand the strength in NASDAQ. My position is that we'll see below 40 on the Qs before this is all over."

    My guess is that tech is doing well due to the weak US$. Large-cap tech generates income in foreign countries. Earnings from Google, IBM, Intel, et al, have mostly been holding up (or even good in some cases)...


    anon: "The short position was supposed to offset the short term risks in these positions. Instead the shorts and longs are moving together. "

    yep... this is why my feeling is that it is going to be tough for both longs and shorts. I think a sideways bear market, which hurts both trades, is more likely than a deep plunge or a big bull market.


    anon: "The 2nd interesting point is how much work shorting is compared to long term buy and hold!"

    I think it depends on the type of short seller. My impression is that most shorts are short-term momentum investors. A lot of the bearish blogs/websites/message board posts/etc seem to point to this. They also tend to be technical so there is very little "value investing" invovled in that. There are exceptions (William Ackman, etc) but most aren't like that.

    If you are momentum oriented then I think the work involved is quite low (at least compared to long term investors who have to develop an understanding of the company.) However, the greatest difficulty is psychological. I don't know how many can hold through the wild swings--especially if there are bullish rallies on bad news.

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