2004: A Spaced Odyssey
Good morning and welcome back to the future. The date? December 31, 2004. The place? The Birdland Jazz Club on the outskirts of Minyanville. The vibe? It's all good. Over some chilled bubbly and finger food, our cast of critters talked ticks, tape and trippy tunes. Moose McFly was there and he picked up the following conversation:
Hoofy: This is getting ridiculous! Last year it was Armani and Prada. This year, I can't even find two matching socks! How the heck did I hit the deck so quickly?
Boo: (flanked by two smokin' cubbies) The oldest adage in the book, Hoofs, is that nobody makes money in a bear market. During the initial bubble pop, I was king of the hill while you took your spill. Then, during that vicious market rip, I took a lonely trip. After the money got sucked, however, investors got, er, bucked.
Sammy: Well, the most vicious rallies always occur in a bear market.
Snapper: It's not just that, Sammy. There was plenty of cake to be made during that cyclical bull (within the secular bear). The problem was that everyone figured that they'd see the writing on the wall and would have plenty of time to get out. Greed has a way of rationalizing emotions, however, and by the time everyone realized that the dips weren't just dips, they didn't want to sell anymore.
Sammy: But that's how the cycle works, guys. Near market bottoms, everyone wants to "let 'em lift so they can sell." Once they rally, however, the mindset shifts from managing risk to chasing reward. It's exacerbated by the media, to a degree, as they like to focus on the positive when the tape is higher and the negatives when it's on its heels. But, by then, it's typically too late.
Hoofy: Yeah, do you remember how bullish the teletubbies were towards the end of last year? I don't hear 'em crowing anymore! But hey, it wasn't their money on the table so why should they care that they led the lambs to slaughter (again)? I'll tell you, If I ever see...
Boo: (cutting him off) Hoofs, you're a big boy and you've gotta take responsibility for your own decisions. I did and even though it was extremely painful at times, I learned an important lesson. I didn't give the bulls their due and they stuck that spectacular rally right up my toukas. They shoulda known that the lopsided boat was due to capsize--especially when I became the poster child for animal abuse. Everything is cyclical, baby.
Snapper: I remember it well, Boo. Third quarter earnings rolled out in October and the early signs were ignored. When General Electric (GE:NYSE), Caterpillar (CAT:NYSE), IBM (IBM:NYSE) and EBAY (EBAY:NASD) weren't up to snuff and the market didn't immediately melt, everyone figured that it was up, up and away. Man, what I would do to see those prices again!
Daisy: Why is it that when the market is lower, everyone wants it higher so they can sell but, when it's higher, they want it lower so they can buy? Nobody ever follows their own internal directive!
Sammy: It's human nature, I suppose. But enough looking back--we've got plenty on our plate now. I mean, did anybody really think that Dubya would lose the election? That the dollar would ever be seen as a flawed piece of paper? That Fokker would marry a midget named Margot? Wow--talk about a wild world!
Boo: I kinda knew it was gonna be different after the Yanks spanked the Sox (again) and Aaron Boone, who got zero respect from the crowd (sound familiar?), said in the postgame interview "Wow. I can't even talk. This is awesome. Like Derek told me, 'The ghosts will show up eventually." They always do.
Hoofy: Yes, and we all have our skeletens in the closet, Boo. Heck, I think I just saw a bone fly out of your mouth! But don't brand all the bulls the same. Green screens are always the sexiest sirens but I know plenty of folks who made sales into last year's rally (instead of trying to make up everything they lost in the previous melt).
Sammy: Yes, the key is that you can't look back and second guess. If you make a conscious decision to lighten up, don't beat yourself up if they keep going. The first sales should always be the worst sales! Conversely, if you decide to press the ride, don't be bummed if they start to slide. At the end of the day, the goal is to make intelligent and proactive financial decisions such that you can enjoy the other, more important aspects of life.
Boo, in his snazzy duds, popped open another bottle of Cristal and filled the flutes of his fantastic friends. He wasn't as brash as he was in 2002, (he learned his lesson), but he was certainly back in charge. As Daisy (in the K-Mart Jacklyn Smith collection) sat on Hoofy's lap (careful not to bruise his ego), they all raised their glasses in sync. They knew that they would always have each other and, in the game of life, that's the most profitable trade of all.
Good luck today.
Todd Harrison is the founder and Chief Executive Officer of Minyanville. Prior to his current role, Mr. Harrison was President and head trader at a $400 million dollar New York-based hedge fund. Todd welcomes your comments and/or feedback at email@example.com.
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