A few thoughts by Roger Nusbaum on sentiment, planning and not panicking. Courtesy of Random Roger’s Big Picture.
Sentiment
This is a rough market by anyone’s measure. It would be reasonable to be a bit grumpy or concerned.
Yesterday was yet another day of crash related selling. Fear is ratcheting back up, VIX is higher than the price of oil as they mentioned on CNBC. Not sure that matters but it is a little interesting factoid.
Given what seemed like an emotional reaction in the market as manifested in the run down to SPX 900 I bought one of the publicly traded exchanges almost across the board with about 60-90 minutes to go in the session.
I’ve been very underweight financials and an exchange is at least a couple of degrees removed from the meat of the financial crisis. I’m going to hold off on naming names on this one, what matters is the increased, albeit slight, exposure. Additionally, like most publicly traded exchanges the name is very volatile and if we ever have a rally again (feel good or otherwise) I would expect it to outperform meaningfully on the way up.
I titled my Greenfaucet post about buying a little Statoil as Bear Markets Should Make You Feel Uneasy. I talked about buying stock in a panic as being difficult in case it turned out very wrong thus causing anguish for clients (I’m not trying to freak anyone out after all). There was no such thought yesterday (not sure what to think about that). I think SPX was at 908 when I decided to do it, I mentioned the other day that down near 900 I’m probably a small buyer, we got there and I was a small buyer.
I would revisit a point I’ve made many times before. I am a big believer in trying to make a plan of action and then trying to stick to it. It should have been clear from recent blog posts that I fully expected to see another run down so I was ready for it emotionally and strategically. The notion of thinking of a decline ahead of time does a lot to insulate from panic.
None the above means we can count on a bottom, or ensures that the purchase will be "right" in the near term. My focus is (repeat coming) realizing the market is panicked and knowing that buying during a selling frenzy usually works out well.
I stumbled across something useful the other day when making the video for last weekend. I said I could buy a fair bit of stock and still be very defensive when I was done buying. I feel fortunate to be in that position. I know from reader comments that there are plenty of folks that were more aggressive raising more cash than me and lately have been more aggressive moving back in.
There is no guarantee that they will be correct but we do know they are not panicked, again a good place to be.
