"I will not fear
Fear is the mindkiller,
Fear is the little death
That brings total Oblivion
I will permit my fear to pass
Over me and through me
And where it has gone
I will turn the inner eye
Nothing will be there
Only I will remain."
I posted this quote on Wednesday, August 1st, when the market was reeling from shocks and I mentioned that we needed to get to cash, get analytical about the market and avoid complacency in either direction.
It is with tongue firmly in cheek that I title this article the opposite of Sage’s last post as I mentioned in last week’s wrap-up that I followed his guidelines on Vacation-Proofing my virtual portfolio prior to my trip (going quite well, thank you!). What I have seen this week though, is a lot of fearful behavior; by retail traders, by pro traders, by the Fed, by World Banks… pretty much by everybody!
One thing I learned as a CEO, as a consultant, as a trader and as a parent is that, while there is certainly a time for action, there is also a time for inaction – a time in the early stages of a crisis to asses a situation calmly and rationally in order to determine a PROPER course of action. There is an expression that goes: "fools rush in where angels fear to tread" which I have always used to illustrate the value of good due diligence to my M&A clients but it is also very appropriate for this kind of market.
Once I lost $45,000 while flying from NY to Houston on a market dip but worse than the fact that I had arrogantly not hedged my positions was the foolish way I overreacted and tried to "win it back" once I got to Houston, far away from my regular trading desk and most of my notes. I quickly doubled my losses and had a very gut wrenching plane flight home, with my virtual portfolio in turmoil – left to the whims of the market.
I often tell members that I don’t mind losing money as long as I learn something but that’s total BS when it costs you $90,000 to find out your positions aren’t as strong as you thought they were. The lesson I did learn from that trip was not how to hedge,…