to the Gilder forum - November
to face a correction
This correction is a lot worse than I expected. Mr. Market,
a short while ago, was in love with dotcoms, Gilder,
technology, growth, and anything that was too complicated
for the average man to understand. Then, all of a sudden,
Mr. Market realized that it had driven valuations past all
realistic expectations and it did an about turn. It popped
the bubble and, without looking at real growth possibilities
of individual companies, decided that anything with a P/E
above a hundred had to be brought down a peg or two.
The psychology is quite different in bear and bull markets.
During bull markets, no one can do wrong. Anything you do,
be it stupid or not, is bound to bring you some profit.
People think that stocks go up because they are bright
people who know how to pick the right thing. In this bullish
atmosphere, I doubt if people check if they are getting the
best possible returns. Who cares, I'm making more money that
ever before in my life (sounds a lot like stuff I said last
year ;-). Then the bear market sets in and
everything drops. But it's not our fault, look how brilliant
we were just a few months ago. We need a scapegoat, the more
visible the better. Actually, GG makes one hell of a
scapegoat. After all, he created the bubble just like Gore
invented the Internet! We also need life vests. It seems
that in bear markets more and more people turn to Technical
Analysis. After all, this is based on true facts, yesterdays
prices. No fanciful chimera of abundant lambdas. No. Just
the facts! Funny thing is, when a TA looks at a chart that
is pointing down, he concludes that it will continue to
point down. No chance in it ever changing direction unless
it finds "support." Support is what someone was willing to
pay for the company some time back, maybe a year or two ago,
when possibly the products were different, the market was
different, the management was different and the height of
the hemline was different. No matter, if someone paid that
price then, that is support now. You can see that this kind
of TA is a self fulfilling prophecy up to a point.
So Mr. Market is creating bargains for us. But, as Jesse
Livermore, the greatest speculator of them all, recommended,
don't fight the tape, wait till prices start to go back up
before you start to buy.
My stated intention was to hold. I have changed my mind in
some cases because the correction is much worse than I
expected and I figured that it calls for a change of tactics
but in synch with my LTBH strategy. I sold several stocks,
mostly with good profit, but which are not recognized
gorillas (MUSE, NTAP, AMCC, PMCS, ALTR, XLNX, PWER, PWAV). I
have held on to known gorillas (JDSU, QCOM, ARMHY, EMC) and
to some that I figure I might as well ride out (GSTRF, GX).
I have been adding aggressively to PRSF (under $7) and
nibbling at AVNX. I haven't had such a large cash position
since November 1998.
creates queues. Supply
gets rid of them."