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The Buy and Hold Fairy

Fairy with a gift

I think that everyone who has ever bought a stock has dreamed of buying one for a few dollars per share and selling it down the road for many dollars per share.  The good old buy it, hold it and sell it at the top strategy.  In spite of a 40% pounding last year and a negative return over the last 10 years the dream is still alive. The tooth fairy bit the dust when most were 5 or 6 years old, but the Buy and Hold fairy must have nine lives or something.

The following is a headline from this weekend’s Wall Street Journal:  Top Fund Manager Sees Decade Ruined, Hodges ‘Very Much Embarrassed,’ Regroups after Nearly 50% drop in 2008.  The article goes on to say, “A $10,000 investment in Hodges Fund made 10 years ago would be worth around $9,015 today, compared with $7,720 if it was invested in the S&P 500 index.”  At least he outperformed the market. I didn’t read the rest of the article, because it wasn’t worth my time.  I betcha it didn’t mention the millions of dollars he collected in fees over the past ten years for that dismal performance.  Embarrassed give me a break.

In my opinion, to make a buck in the market you must first take charge of your own finances.  At least if you lose money, you won’t be shelling out thousands of dollars in fees to the “pros” for similar results.  Secondly, you must say good-bye to the Buy and Hold fairy.  She was comforting as a kid, but now it is time to move on.

Buy and Sell should be the new mantra.  Learn how to employ entry and exit techniques.  Become more of a trader than an investor.  If trading sounds too much like work, focus on saving and leave the market to others.

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Wall Street: Capitulation Watch, the Lie and the Mouse

Have we hit the bottom?  That’s the million dollar question.  I wish that I had the answer for you.  I watch CNBC (too much) and all of the clowns that were calling for bottoms in March and July have gone radio silent.  That’s been replaced with capitulation look out.

Capitulation is when there is a tidal wave of frantic selling typically over a day or two.  Basically everyone throws in the towel and says “no mas.”  The DOW is down 23% this month.  The S&P 500 is down 40% year to date. Commodity stocks are down 50-70% this year.  Does the market really have to go down another 10%, in a day, for people to say “Uncle?”

The theory is that after everyone finishes up chucking – the market can begin its recovery.  Maybe it will play out that way.  However, with some many people looking for it – I am sure that Mr. Market will have something else in mind. Continue reading “Wall Street: Capitulation Watch, the Lie and the Mouse”