I've been in India for several months, which means I see very little American TV. At the moment I'm in a swank hotel, however, and I had the dubious privilege of viewing a 'financial news' segment airing the views of retail investors regarding recent declines in the stock market.
The question they were all being asked was "How much pain can you take?"--i.e., how far are you willing to let the market fall before you get out?
I was surprised by the answers: 20-30%. "I can take a lot of pain," one participant declared. What on earth would that prove?!? Don't get me wrong: the ability to take pain is a great quality to have if you make a living breaking bricks with your forehead or walking on coals at a traveling freak show. It's even more valuable if you are committed to staying in a bad relationship. But in the market? No, sir, what you want there is not the ability to take pain but the sense to take profits.
I rather felt as if the host was goading her guests, prodding them to see whether any one of them was awake to the real meaning of his or her words. Surprisingly, none was. None of them said, "I can't take any pain. I'm going to take my profits now and buy this guy's stocks when he sells them after a 30% drop."
What does that tell us about the market today? Maybe nothing, or maybe that the real Play-doh is not going to hit the fan until we see a 30% drop. I feel uneasy.
Disclosure: I am long SH.