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Friday,
January 16, 2009
(Cont'd from
above)...
Jim (cont'd):
But if I thought it
was time to give up
on stocks… come on…
I would unroll my
sleeves like
everyone else on T.V….
I would sit back and
relax in a chair…
and I would
certainly stop doing
this show… but I am
still here… and
stocks can still
work for you… as
long as you know
what you are doing…
you have the
potential to try and
make a lot of money
in the market… so
please don’t
despair… or let some
of the ways that the
market is set up in
favor of the big
boys to rob you
blind… and they will
do that believe me…
don’t let them crush
the potential that
you have… by pushing
you out of the
building and off to
the sidelines… but
if you are going to
keep investing you
need to learn how to
cope with one of the
absolute worst
feelings out there…
losing a boat load
of money..
You know, if I had
quit…. every single
time I lost money on
a stock… or every
time my whole
portfolio was down…
I never would have
gotten anywhere… you
know, I am just like
you… every time I
take a loss I feel
like quitting… big
loses… yeah… I mean
I question
everything… I want
to just give up… I
can’t take the pain…
I used to throw
things at people
back at the hedge
funds…. telephones,
bottles of water,
keyboards… no one
was safe from flying
pieces of technology
on a down day at my
old hedge fund… now
I will be honest… I
do not have a magic
formula that will
prevent you from
ever losing money in
the market… no one
has it.. although
you get a lot of
spam traffic that
say they do… if you
are in the game,
there is no advice I
can give that will
make all your stocks
winners… there are
only two kinds of
investors… the kind
that have lost a lot
of money at one
point… and the kind
who are going to.
But, I can help… I
can help you prepare
for your losses
emotionally… and I
can help you prepare
your portfolio so if
the market breaks
down… you can
mitigate the scope
of the damage and
stay in the game… I
have been through it
all… and I can tell
you that it pays not
to be scared off… it
pays not to give up…
I have wanted to
give up many times…
and I can also help
you with damage
control, which I
will explain after
the break… you might
not be able to spot
your first loss… but
once things start
turning against you,
there are ways to
avoid taking more
pain… to do this I
am giving you a rule
that should help… it
is from the first
gospel according to
Cramer, which is
REAL MONEY Sane
Investing in an
Insane World… here
it is, expect
corrections do not
fear them… expect
corrections don’t
fear them… what is a
correction… a
correction is when a
market goes on a 56
game hitting streak…
like Cramer fave Joe
Dimaggio… and then
doesn’t get on base
the next day… it is
when the market has
been roaring and
then one day boom it
gets crushed… if you
are getting smacked
in the face with a
correction… my first
reaction used to be
that I never wanted
to own another stock
again… I had lost a
lot of my gains… I
couldn’t believe how
foolish I was… I
thought I was
stupid.
That is the wrong
reaction… because
stocks can come back
from corrections…
from big declines
after the market has
had a big run… the
lesson here is not
that you should be a
impermeable..
sometimes stocks go
down and keep going
down… but when the
market peaks, people
act like the world
is ending… if you
lose money during
the correction you
might be tempted to
give up on stocks
all together…
historically,
though, that has
been a pretty bad
idea… just because
we have corrections
all the time… so how
do you get around
that feeling that
you need to just
abandon ship when
the market tanks…
you need to be
psychologically
prepared for the big
corrections that are
inevitable… they are
certainly hard to
predict when they
will happen… but
they are inevitable…
they can happen to
an individual stock…
to an index… even
the bonds… and most
of the time people
do not see them
coming… so you
should not waste any
time beating
yourself up because
you didn’t see the
top coming… if you
view corrections,
these big down turns
as a natural feature
of the stock market
landscape… as
something you don’t
like but you can’t
avoid… then you
won’t get flustered…
and you won’t give
up when it happens
to one of your
stocks or to the
market entirely.
Now, sometimes when
the market goes down
big it doesn’t come
back quickly… it
just keeps going
down… 2008... how do
you tell the
difference between a
correction of full
on market meltdown,
where your best
course of option is
to sell enough of
your stocks.. . so
that you will have
the cash that you
need for the next
five years… while
you wait for the
market to come back…
I look at the
fundamentals… and
some of the things I
will tell you about
later in the show…
by having a superior
attitude and a
superior state of
mind… like Steven
Siegal, who plays
Mason Storm in Hard
to Kill… so you can
stay in the game.
Here is the bottom
line…
▼ ▼
▼ ▼
▼
The Bottom Line!:
If you are
emotionally prepared
for the inevitable
correction… for a
steep so called
unexpected downturn
in one of your
stocks or your whole
portfolio… then you
won’t feel so
terrible… and you
won’t decide to give
up on the market…
and that is a good
thing too… because
it is one of your
best chances to make
lots and lots of
money.
Be emotionally
prepared for the
inevitable hit your
portfolio & stocks
could take...
Look, no market… no
market… not this
one, not any other…
is for the faint
hearted… I want you
to get tough… I want
you to ramp up your
confidence… I want
you to accept the
inevitable
corrections… and,
yes, I want you to
stay in the game.
[verbatim recap]
▼ ▼
▼ ▼
▼
Jim went on after
this segment to take
questions from
callers, and
responded with his
comments...
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Q:
I was
wondering if you
would just run
through the
signs that are
seen in the
market when a
bottom is at
hand?
Jim:
Well, there are
a couple of
things that I
like to see when
the bottom… the
number one thing
is a fundamental
thing… and I
have to tell you
Jerry, this is
actually the
thing that I
have used most
in my career… it
is when all the
earnings
estimates are so
low… that the
average stock
beats them… as
long as there
are earnings
estimates that
are too high…
and a company
reports and it
misses its
estimates… then
that stock is
going to go
lower and other
stocks are going
to go lower with
it… so my number
one sign is that
finally the
estimates are
cut to the point
that the stocks
can beat them…
my second one is
that there are
so many new lows
and so few new
highs, and
everyone has
gotten so
negative, then I
think a bottom
could be hand…
the third one is
when the S&P 500
oscillator,
Standard &
Poor’s
oscillator, this
is one I pay
for, when it
goes to -5, I
believe that
that is going to
be a bottom, too
much selling
pressure… and
the final one
that I use is a
bull bear ratio,
that comes out
on Wednesday’s,
and when that
has a
dramatically
higher number of
bears than
bulls… it is
time to pull the
trigger.
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Q:
After a
correction, is
it a good time
to pursue
opportunities?
Or is it better
to wait a couple
of months for
the market to
stabilize before
jumping back in?
Jim:
I am no seer…
which is why I
buy in stages…
first of all we
don’t know when
after correction
is… we have a
lot of
symptoms.. .we
have a lot of
tell tell
totems.. so what
I like to do
though is say
okay listen, I
think the
correction is
over.. so I come
in and I want to
buy 100 shares
of Kimberley
Clark… I buy 25
here… and then I
wait till it
yields more and
then I buy
another 25...
then I wait till
another quarter
percent yield
more, then I buy
it…that way I
use the
corrections to
make me money…
rather than to
freak me out…
like so many
people who have
been in the
game… and then
been blown out…
there are people
that have got
blown out from
2001 to 2003...
never came back…
and then missed
a double in the
market.
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Q:
What
percentage of
the market going
down do you
consider a
correction or a
pullback?
Jim:
I have always
used the figure
of 5 to 8%… 5%
is a light
correction… 8%
is heavy… once
we get past
there at 10% I
begin to try and
reevaluate and
say we are maybe
in something
bigger… maybe
bear market
situation… I
have
historically
loved to buy
stocks I really
like of
companies I
really like on a
5 to 8%
pullback… that
is where I would
start… now,
periodically in
times like
2008... it just
tells you look,
down 10%… turned
out to be too
much… got to be
careful… it is
going to be much
worse… and that
turned in, that
worked into a
bear market. I
am trying to be
careful in
bears… and that
is when I use
requisition
resistant stocks
and high
yielding stocks.
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[verbatim recap]
[end of segment]
Read Jim's next Segment
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