The Summer of Our Discontent
Please recall that changes in price levels are merely the memorialization of everything that has occurred in advance and under the surface. The afore-mentioned post represented the initial warning of the changes that were occurring then, and that continue to occur now. The market is a dynamic process, which serves as one reason many investors fail to find sanctuary in its embrace; instead, for them, the market's embrace is in fact a strangle-hold.
I want to be careful, however; this post must not be an I told you so but instead be helpful: what might occur next?, how best to deal with these particular changes?, for how long might they endure?, etc. Which is why I appreciate your public comments: they help me help you.
The first item to seek is support for individual stocks (especially your favorites) -- and then the general markets; because general market measures are averages or indices, they will rise or decline less than most individual stocks. Are your stocks among the market's leaders; i.e., do they decline less than the general markets? When the markets stabilize, do your stocks rebound with alacrity? Whether yes or no, the answers are a crucial tell; always listen to the market's message.
If, as, and when your stocks rebound, do they rebound to easily identifiable upside objectives, exceed those levels, or, shiver, fall shy? Is the subsequent decline shallower than the prior (this) decline? Etc. This series of testing is necessary to heal such a tremendous and ferocious price drop; it becomes what commonly is called a base -- a base obvious to most investors only retrospectively. (My next post will highlight a massive longside opportunity for an entire sector.)
Next, identify your investing time frame, if not already done. Is this decline mere noise within your time frame? If so (and it is mine), do nothing (do not panic!), but be prepared to purchase more shares of your leading opportunities. Moments such as now are what separate the men from the boys, the prepared from the frightened.
As this or any price decline continues, great opportunities become available at price levels that represent sheer value; all that remains is more shakeout albeit at a slackening pace -- and time, more time. But you, the prepared, are ready for that, and more.
Full Disclosure: Long the 9 Core Opportunities (Apple/AAPL, Chipotle Mexican Grill/CMG, Google/GOOG, Colgate-Palmolive/CL, Intuitive Surgical/ISRG, J Crew/JCG, MasterCard/MA, Research in Motion/RIMM)
-- David M Gordon / The Deipnosophist