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Stocks Investing – don’t run naked with the crowds



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Nov 30 2007
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StockTube had said previously that investors shouldn’t run naked but take their own sweet time to put on their clothes so that nobody could call you cuckoo. Speculators or gamblers on the other side ran helter skelter and unfortunately investors whose emotion were put to test decided to join in the crowd, most of them ultimately. For decades, the same emotion runs wild and didn’t change; perhaps it will never change as long as human is trading the stock markets.

Yeah, easier said than done – who would know what will happen next? A bird in hand is worth two in the bush and so instead of normal selling it became panic selling when the Dow Jones decided to take the bungee-jump recently. The reason for selling was quite silly though – because of the old sub-prime old problem but if this known reason was used to even infect technology-stocks, then something must be terribly wrong. Investors couldn’t invest rationally but emotional instead and that’s something you should be able to read.
Ben Bernanke third rate cutIt could be a systematic plan by big boys to force Ben Bernanke to tilt towards submission – that’s to cut interest rate when it meets on 11th Dec 2007, its’ last session of the year. Just to refresh what FinanceTwitter had said previously. It’s unlikely that U.S. economy will suddenly slam into recession although the odds have grown. You got to remember that Federal Reserve has tons of bullets to shoot the recession down. Uncle Ben could takes his own sweet time playing bubble bath and still can make the call to cut another 25 basis points for a whopping 10 more times; and still the rate would be at 2.25.

The big boy’s plan works and Federal Reserve Chairman Ben Bernanke on Thursday hinted that another interest rate cut may be needed to bolster the economy. Fed policymakers will need to be “exceptionally alert and flexible,” Bernanke said. Analysts said the Fed’s next move on interest rates depends on the outcome of next week’s employment report. If the report shows a weaker employment climate, that could seal a rate cut, economists said.

So, if you had taken some positions when the Dow hits just below the 13,000 points you might be smiling now. If you had believed in the business model of Google Inc. and thought it would be silly for the stock to plunge below $600 a share, you could be smiling as well. And if you had believed Apple Inc. would not simply collapse because of the over-trumpeted sub-prime issue, you’re part of the smiling crowds. But most importantly if you believed your stocks’ fundamental were simply awesome and decided to hold on instead of running naked, give yourself a pat on the back.

# TIP: Don’t always run naked with the crowds investing stocks or trading option. Think rationally of your own portfolio. The crowds are not always right and you’re not always wrong.

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Comments

stock tube,
what do you think of google warrant in malaysia, at 0.18 sen, is it sensible to invest in?

hello anonymous … somehow i don’t like to touch malaysia’s call warrant … cheers …

A very nice post. Running with the majority can be a safe bet but I think you are right that looking closely at what suits a particular portfolio has to be a better long term strategy. That said I would have like to have followed the crowd though who bough Northern Rock shares after their crash and subsequent upturn.

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