More Clues to the Nearness of the Bottom

“I am so buried right now with the lower prices compared to what I paid,” he said. “But if I can get what I think is a reasonable amount, I’m going to sell out.” - Investors flee to stock market’s sidelines, no return in sight - MarketWatch.

I am always happy to see articles like the one above from MarketWatch. I remember similar sentiments in 1987 and 2002.

Here are a couple of more quotes from the article from professor Terrence Odean:

“There was a sharp drop for a couple of days in 1987, but this is very different,”

“It’s not unreasonable for people to want lower exposure and risk in this environment,” said Odean.

It is a source of continuing amazement how investors love stocks when they are high and cannot bring themselves to hold them when prices are at their lows. It appears that this happens to investors at all levels. The emotional pain of seeing one’s investments lose value is just more than many can handle.

And finally, when the investor quoted at the beginning of this article was asked if he would come back into the stock market:

“There’d have to be a dating period. I’d wait and see what happened three or four years down the road.”

Sounds like timing for the next market peak!

Comments

[makeithappen:]

I really wonder how anyone thinks they are going to make money if they sell at the bottom and buy at the top. Buy NOW- hold what you own...and look for the solid companies with high yields,they are out there???
understanding your nervousness

2008 Oct 23 06:48 PM

[Adam O.:]

There seems to be a lot of tunnel-vision going around lately. Comparing what's going on now to the other market crashes, save the 1930s, shows a lot of reckless ignorance.

What you're seeing isn't just a stock market crash or a wave of nervousness. There are problems here much deeper than the equity markets. This is a systemic destabilization occurring on every economic plane across all nations, big and small. Take a peek outside the walls of Wall Street.

Perhaps the people questioning whether or not to "hold them when prices are at their lows" aren't as silly as you imply. These assets can go to zero. Real quick.

2008 Oct 23 08:07 PM

[Old Rick:]

I'd like Adam to explain how a company with real earnings, low debt, good free cash flow, and good dividend goes to zero. I understand why Enron goes to zero or Worldcom goes to zero (fraud!) but how does (e.g.) KFT or MSFT go to zero? I'd have to go along with makeithappen here.

2008 Oct 24 08:41 AM

[axelrod608:]

The market has at least two more crashes ahead. Hedge fund selling in Nov and Dec to redeem the last two weeks' withdrawals and selling in Jan/Feb to cover redemptions triggered by the Nov/Dec withdrawals. By then there should be very little money left by investors who can be spooked.

DOW under 800. probably under 700. Happy Holidays !!!

2008 Oct 24 12:26 PM

[NDCCPA:]

I am looking at a bottom somewhere between 6,000 and 6,500 for the Dow....Europe and Eastern Europe as well as Japan and Korea are going to be real boat anchors dragging us down too.

2008 Oct 24 10:20 PM

[Marek:]

Curious how do you figure that level?

2008 Oct 27 12:13 AM