The market is now baited - dont get hooked yet

On Thanks Giving day the NYSE was open and the DOW was up around 900 points for the day. Then on Tuesday the TSE opened and we were up around 900 point for the day. There was a growing optimism on the streets of Summerside. But not me. I was just a bit shocked how people could get wacked so hard and then change their attitudes so fast. This type of mental recovery should be extensively researched to possibly prevent future wars or even divorce! Well all joking aside, what should the average investor be thinking about the market these days? Here are some ideas floating around in investor world.

- its a deal, time to buy
- get out, before it gets worse
- hang on, we own good stuff

so there it is, three options. buy, sell or hold.

There was a successful 70 yr old gent in my office the other day. His account is not with me yet and his broker has advised him to hold. He was losing $1000 per hour according to his math. I dont know much about him but I sense that he is a very intelligent fellow. He believes that "only the stupid money is still in the market". He is struggling with the options. Take the loss, hang on, use the capital loss against a capital gain and so on. I am certain about 1 thing, he would be having a lot more fun right now if he would have moved out of the market. My clients moved out in August 2007 and have not lost 1 cent. In fact they have made 3 per cent. I have a few principals for managing money, here they are:

1. you dont need to be a genius to make money in a good market. Everyone does.
2. you need to be a smart investor, or have a smart advisor to limit losses in a bad market.
3. you need to remember that panic and people drive the markets. Not scientific forces.

What you are seeing the last few days is nothing but the temptation of the baited markets. The economy is still bad and needs time to recover. I call this a devils market. If you know the lords prayer, its a good time to burn the 2nd last verse into your brain.

Lead us not into temptation,
but deliver us from evil.

The most important financial strategy right now, is to have a healthy relationship with your broker. While good news and optimism makes people feel good, a properly risk managed portfolio can prevent the condition.

I leave you with this quote:

Bull Market:

Is a random market movement causing an investor to mistake himself for a financial genius.

Jeff McLellan, President of MN Investments