Monday, August 8, 2011

Season of Red

It has been a couple of days we saw a bloodshed in the stock markets across the world.  The world is so burdened with all the problems, from the US debt deal crisis, to European debt crisis, to the downgrading of US treasury debt.  So many problems, yet no solution in sight.  It seems really bad, but is it?  The US debt deal crisis between the two parties seemed urgent and critical, but did it really matter?  As expected, a deal was made just before the so-called 2 Aug deadline.  Then came the downgrading of US debt by S&P.  So what?  Did we already know that US debt is not sustainable, and the downgrading is long overdue.  There is really no surprise.  Then why the bloodshed in the markets?  Well, the crocodiles are ready to attack, that's all.

If you can't fight them, join them.  Somebody told me about this.  Comparing with the way I handled the financial crisis back in 2008/9, this time round I must say I handle it better.  In the last financial crisis, and the one before, I was afraid, I was scared, and I followed the media, I didn't have a plan, I didn't know what to do, and I was restless, I was impatient.  This time, I am getting more patient and calm, as finally, I have a plan.  I stopped putting any money in the stock market since March.  I deemed the prices are too high, valuations are unattractive, coupled with high inflation, high housing prices, high oil prices, it is a perfect environment for an impending financial crisis.  Together with falling BDI, low VIX, all the conditions are right.

Now the storm has come.  I cut my losing counters short.  Money lost is money lost, just go out to get it back somewhere.  There is no point mourning about money lost, just like no point mourning about spilled milk.  Learnt the lesson, admit mistakes were made, then move on.

This is a season of red, a season of hope and fear.  Have a plan, and follow your plan.  Happy investing.

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