Pep talk: Keep your head up even when you’re down from the highs
And if it’s bad Don’t let it get you down, you can take it
And if it hurts Don’t let them see you cry, you can take it
Hold your head up, hold your head up Hold your head up, hold your head high – Argent
Muddy Souls – Come Hold Your Head High
Hey, let’s not be freaking out about a market pullback or a drawdown (being down from the all-time highs) in the portfolios.
This is why we trim, sell, raise cash, and get more cautious when we expect at pullback, just as we did at the tops this time. Remember when I wrote in Prepare for pain while you feel good about:
Can you handle being down 10-15% or more for six months? It will happen to you at some point in the next 10 years — you’ll be cold in your trading for months-longs stretches.
And I want all of you right now, while the markets are up through the roof and our positions have been rocking to think about whether you’ll be okay when all this happens to you at some point.
Or here last week when I wrote in the Chat Transcript for Apr 4, 2012: SNDK, FIO, Apple suppliers and much more:
Q. Cody, what’s your guess for FIO and AAPL Earnings Reports? I have May and June calls for both. Would you recommend selling or holding on? Thank you!
A. The problem with your question is that they’re both likely to trade at a high-beta (beta is a measurement of volatility relative to the broader markets) for the near-term and your guess is good as mine about whether this pullback continues past the 5% minimum I was looking for and we’ve already now got or whether it continues to the 10% maximum I was looking for.
Most of the time, the high beta stocks that we own will pull back more than the market when the pullbacks do come, just as most of the time the high beta stocks that we own have far outperformed the market when its been in rally mode.
Or just a few days before that when I wrote in: Are you ready for this bubble?
I do expect we’ll get a 5-10% pullback in the stock markets (probably a sell-the-news reaction to earnings season which kicks off in two weeks?) but from a broader perspective, it sure looks like the tech stock bubble that we’ve been investing for continues on track.
Or just a couple days before than in Guts, Tablets, Predictions, Rumors and other things every investor needs to know that:
Market’s down this morning, but is trying to bounce back from the lows. Path of least resistance is probably lower, at least for today though. Remember when the market was just about to break out a month ago and I wrote this one, by the way? How to trade the market as it’s about to break out (Updated). We are a long way from those levels now. I’m likely to raise some more cash here as we’ve had such a great run and I want to be disciplines and flexible as always.]
Look, I hate losing money as much as the next guy and I’m not at all-time highs in my portfolio right now either. That said, I’ve been vocal about raising cash and putting on more shorts as we were at the highs a few weeks ago, and I took my own advice as you guys know and sold and trimmed and bought puts and what not as we were hitting new highs. And I’d been aggressively buying when we’d been at the EU/Greek-crisis lows a few months before that. So while I’m certainly unhappy about not having sold everything at the peak and gone short and continued to hit new highs in the portfolio…that’s totally unrealistic. And no portfolio goes straight up, so why would any of you be freaking out about yours not being at all-time highs at 5:29pm EST on the sixth trading day of April in the year 2012. Was being at an all-time high tonight really your goal in buying any of these stocks? I always remind you that investing and trading is about the next 3000 days, not the next 30 or 300 days.
Pain comes with trading. You will have losses. You will be cold. We will have pullbacks from our highs. Don’t lose focus, and don’t let a drawdown from the highs mess with your strategy. Be patient and steady and don’t force anything. I’m likely to start scaling into a more aggressive overall stance if on any weakness in the markets from here.
