Its only human to change investment opinions on recent market actions. Our emotions can change from day to day and from tick to tick. However, basing your decisions on loving a market more as it moves higher or loving it less as it declines will eventually prove to be very hazardous to your investment health.
I tend to like a market less and less as it rises and appreciate it more as it declines, hard lessons learned. We raised a great deal of cash for clients two weeks ago as sentiment indicators had moved to an extreme….extreme love and affection for stocks. From out of the blue China raises interest rates and our President initiates a populist attack on our largest banks. With most market participants fully invested, their next move could only be to sell which they’ve done with vigor.
Now, markets have come down and sentiment has cooled considerably. This means its time to pull out my yellow pad and develop a list of potential additions to portfolios. Gold is looking increasingly more attractive down here as well.
Having a significant amount of cash on the sidelines changes your state of mind enormously in a pullback. Market sell-offs are not something to be entirely loathed as you don’t feel quite so humbled. Sell-offs now become a window for opportunity as we cheer for fear and loathing to return to set us up for the inevitable rally.
Be careful out there,
Brad
Long Gold