Saturday, April 4, 2009


Recently I've been ruminating on the "old days" of investing, the days of fractions, not decimals. On good days stocks went up 1/32, 1/8, or, maybe, 1/4. A good market day and you got a 25 cent upside! If a stock went up over 1% it meant it was being acquired. The advent of decimals signaled smaller moves per the experts. Stocks would be priced in pennies and market makers would no longer skim the difference between fractions. The change was intended to benefit small investors. God, I long for a return of those peaceful, fractional, days.

A market that routinely moves 2-3% upward or downward is now commonplace. What fundamental change could possibly validate those swings? I'm afraid it isn't fundamental investment analysis. We are in an era of trading on steroids. A super charged Jinga game that could fall at any time. The scary part is that we won't be able to forecast the crash since the market isn't functioning rationally. Investing morphed into trading and trading morphed into speculating. Trying to stay with an investor mentality takes huge testicles and a very long timeline.

The huge swings we experience daily are cause for continued concern. I fear that we will return to a lower level of valuation before any serious correction upward. We still haven't seen that investor capitulation that can signal a market bottom and a renewed interest in equities. Be careful as the Jinga blocks are still being removed from the stack.

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