by Gavin M.
It hasn't been an easy journey for me being a bear these last few years. My neighbor who owns properties here in Santa Barbara throws about $200,000 of his money each year into the stock market. His comments last week perfectly encapsulates the central bank economy: "Gav, I think you're wrong man. This market keeps going up and I keep making more money each time I buy stocks like Apple and Chipotle." When you put it that way, I would not disagree with you. If you have been constantly buying the market since 2010, you would be net positive on your investments. There is no arguing that. This is the result of these idiotic markets - the brazen confidence from investors that their positions will never go against them.
Perhaps selling should be outlawed. Perhaps everyone should just give up selling and just keep buying. There is one clear distinction between my neighbor and I: I am a trader. He is an investor and what he has is the gift of time. Investors are enjoying this market as they continue to buy. As a trader, I cannot hold my position ad infinitum. I am happy for those who chose to be optimistic in this market and continue to buy amid all the bearish noise.
However, here is the one big differentiating trait between my neighbor and I: he has no plans to cash out his profits. This is the type of 'Buy and Hold' mentality majority of investors right now are employing. While it's true majority of retail investors have given up on the stock market, the ones that are still in have no plans of taking profits. My neighbor bought Apple since it was $400 before stock split. He continues to buy each year.
I do not know if there will be a crash soon or in 2020 or in 2050 or maybe never. I consume all market info and make my decisions after the fact. Though I am always a bear, I do not always short each time a stock or the S&P 500 breaks out. But my point here is that majority of investors are always in a profitable state until a bust happens. Take 2007, majority of my co-workers were in profits with their RIM, Apple, Exxon and etc., positions and then it went bust in 2008 before they even took their profits.
Being paper rich does not equal to being really rich. When you are up 50%, 100% and etc on your investments, it may make you feel like you're Warren Buffet but if you do not take your profits and wait for the next opportunity to buy in, then you are just as bad as the guy who leases a Porsche and tells everyone you bought it in cash.
The markets do not pay you until you hit that Sell button. If we do not learn from the mistakes of the past, then we are doomed to repeat them in the future.
Traders from Equity Sense will be writing on this blog on positions and other market-related things.