Investors Assume the "Ostrich Position"
But hope is not a viable investment strategy.
Yesterday on the close, I called a beloved member of my family who had "tossed" some money at the market in December. "Things will eventually go back up," he said, "it always does."
What did you buy, I asked with genuine concern, somewhat perturbed that I wasn't consulted after my personal crusade last September to warn those close to me that something seismic was afoot. "A nice mix of quality stocks," he said, "Apple (AAPL) and General Electric (GE), for instance."
"Good companies don't always make for good stocks," I told him, "GE, in particular, concerns me, even though it's all the way down to 20ish."
"Dude, it's GE, it's not going away." he countered, "Besides, I'm already down a dollar on it. When I get that back, maybe I'll sell."
Yesterday, with the very best of intentions, I pinged him to ask what his game plan was.
"Too busy to deal with it. Too late now."
This morning, while walking to our weekly Wednesday ExCo meeting, I was reading the C-section of the Wall Street Journal. The theme of the lead column was that investors are so frustrated--so shocked--that they've stopped looking at their statements altogether.
"I'm so horrified, I haven't got a clue what I've got right now."
"I'm doing my best to ignore it."
"I'm afraid I'll burst into tears."
In other words, they've assumed The Ostrich Position, where you bury your head and hope for the best.
That's certainly an option--not a viable, proactive, lucid option, but an option. The other alternative is to proactively prepare even if you're in despair.
The best analogy I can use is when you step on a scale. The number that registers doesn't tell you how much you weigh, it tells you how much you weighed, the cumulative results of your diet, exercise and metabolism.
The same can be said of your financial awareness. Just because you ate donuts--whether they look like Citigroup (C) or smell like General Electric--doesn't mean you must continue to operate in the same manner. Read the ingredients, look at the expiration date, balance your budget and be psyched--genuinely psyched--that you're gonna look and feel better than you did yesterday.
There are no blanket answers to achieve this, no sound bites or quick snips. It's a movie, not a snapshot, and one that requires active participation on your part. The markets operate as pure meritocracy, one where you'll get out of it what you put into it.
As Minyans, you already know this. Quite hopefully, with your help, we'll attract alotta ostriches into the 'Ville with hopes of converting them to being part of the solution.
For at the end of the day, society is simply a sum of the parts.
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 firstname.lastname@example.org.
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