If you’ve been reading this blog long enough you know it’s pretty rare for me to comment on specific stock action or the market action in general – I find it almost pointless to focus on the short term gyrations if you are a long term investor – except maybe if you are looking to be buying more.
The trouble with this attitude is that sometimes people may think I’m flippant about the markets and many might assume an advisor is supposed to be all worked up and in a fluster in order to earn their keep at times like these. Well, believe me: I’m earning my keep by not getting all worked up and letting people make the mistakes they naturally want to make.
I’d start to get scared when the market STOPPED going down and there was no trading going on. It might indicate that no pros are willing to buy the stocks that some investors are dying to get rid of. Yes, lest ye forget, in order for a stock to move down there must be a transaction that takes place at a lower price than the previous transaction. That means that someone has to be willing to buy the stock you are panicking to get out of.
Not to sound too flippant but the person who is doing the buying most likely has a better grasp of the concept of “buy low, sell high” than the seller.
Thank you! I’m here all week… Try the fish. :)
Great post Preet. Question, do you add to your positions during downturns like these? Or perhaps wait until there are signs of a turn around? Or do you systematically add to your positions regardless of where the market is?
This is an absolutely brilliant perspective. Reading this took away about 90% of my uneasiness. Thanks Preet
Preet,
Thanks for the laugh. I needed that. By the way, the fish isn’t bad, but needs more lemon.
Tim
@MDJ – personally, I just keep adding systematically. For some more-active clients: with brand new cash we are deploying half now and waiting to see if it goes lower before committing another quarter. The final quarter would be either dollar cost averaged in over a year or deployed once volatility and bad news stops springing up. For those clients who are already half cash, we are deploying a quarter, etc.
@Acres – thanks for the kind note!
@Tim – I’ve heard before that part of being an advisor is “show business”, although they mean it in a different context. :) OMG two for two!
I wonder if this is what’s behind house slumps where prices plateaus for a decade: Home buyers want to sell, but buyers are smart enough not to pay the prices being asked (even if its a small discount).
The market isn’t going down because sellers can’t / won’t offer their property at a massive drop in value, and buyers won’t pay inflated prices based on the previous bubble, so the volume just drops out of the market and price stagnate.
Is it no longer politically correct to recommend the veal? ;-)
@Mr.Cheap – makes sense to me!
I’ll recommend the veal when it’s worth recommending… Lately though, the fish has been phenomenal. :P
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