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There is this old rule: when witnessing a domestic fight, don't meddle
or you will end up hit by both...
At the moment we are witnessing such a fight:
- longs vs shorts,
- believers in old against believers in new economy,
- new business models vs valuation criteria
- believers in sweeping changes through internet, vs belief there ain't
anything new
- herds fleeing from group of stocks to other
- etc
A few weeks ago, saying I am moving out of stocks, I got laughed at.
Well I exited too early admittedly, but now I don't hear anything
anymore about why I should remain long. instead, many are pondering how
far down we could go, targets, short selling opportunities etc. I know I
am certainly too early again, but I know it never comes as everyone
expects. My view is we'll have neither the clean crash nor the clean run
back up, we'll have a nice saloon door. Too many have made (big) money
in too short a time. The market being the best device ever invented to
separate portfolios from their cash, I presume we are entering a period
where it will remain wildly unpredictable without regular and long
enough trends, so that everyone will get hit no matter what they do.
In my view, this is the time where you typically a/ pull out completely
or b/ follow your system religiously, hoping the drawdown won't be too
bad. In other words, this years profitability will be played out now,
measured by the amount of discipline one can retain in the face of
extreme and shifting emotions.
Gwenn
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