Aug 22 2011 Video Blog

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Justice for Ninoy

　

http://cornholiogogs.multiply.com/journal/item/1020/Justice_Is_Not_Only_Blind_Its_Lame_

The Stock Market

http://cornholiogogs.multiply.com/journal/item/305/The_Sky_is_not_Falling_Part_1A_

　

http://cornholiogogs.multiply.com/journal/item/955/What_is_a_Bear_Market_and_Why_Is_It_Good_

　

http://cornholiogogs.multiply.com/journal/item/971/Proof_That_I_Listen_To_What_You_Say_

　

http://cornholiogogs.multiply.com/journal/item/308/The_Sky_is_not_Falling_Part_4_A_Study_in_Human_Psychology

Ed

investments, stock market, fear, justice, news, ninoy aquino, headlines

Proof That I Listen To What You Say

Today I went to a family lunch and I ran into my cousin who was fondly remembering and recommending to his twin brother my goofy wacky interviews. Stuff that he has seen in this space. So just to prove to you that I listen to those who can actually be amused by what I place in my little corner of cyber space I give you more of that. So nothing coherent or new here. Except for new mumbling. Timi Nubla sorry that all the evidence has not been destroyed. Ed

Tags: timi nubla, stock market, ricky carandang, yvette novanario, stock market live

The Sky is not Falling Part 5B Using Fear to your advantage

I am sitting at my desk in the office doing my work and my uncle walks in to talk to my other uncle. Carrying this book. I had to steal a shot since he was so out of it that it was hard to ask him if I could take a picture. Reminded of a blog entry from before. Up to you to validate what its worth .

Ed

http://cornholiogogs.multiply.com/journal/item/309/The_Sky_is_not_Falling_Part_5_Using_Fear_to_your_advantage

Fear Part 2

The Sky is not Falling Part 7 Words from a Great Investor

There are just some people who are rich that you are glad are rich. Like Warren Buffet. Not sure what you think but he did not make his money wheeling and dealing. He pretty much had Omaha , Nebraska as his base. He did not have a constant ticker update in his office. All he does is look at companies, finds ones that are under valued by the market then sells when they achieve their worth. It's patience and study and staying on the course. Its not knee jerk reaction or chasing the next hot things. It may be boring to some but to quote Herman Boone "It's like Novocaine, give it time and it works".
Ed
To read my previous entries on the Sky is not Falling just Google "edrlopez sky falling" or go to the multiply home page and click the tags investments, stocks, money,fear.
http://www.nytimes.com/2008/10/17/opinion/17buffett.html?_r=1&oref=slogin

THE financial world is a mess, both in the United States and abroad. Its problems, moreover, have been leaking into the general economy, and the leaks are now turning into a gusher. In the near term, unemployment will rise, business activity will falter and headlines will continue to be scary.
So ... I’ve been buying American stocks. This is my personal account I’m talking about, in which I previously owned nothing but United States government bonds. (This description leaves aside my Berkshire Hathaway holdings, which are all committed to philanthropy.) If prices keep looking attractive, my non-Berkshire net worth will soon be 100 percent in United States equities.
Why?
A simple rule dictates my buying: Be fearful when others are greedy, and be greedy when others are fearful. And most certainly, fear is now widespread, gripping even seasoned investors. To be sure, investors are right to be wary of highly leveraged entities or businesses in weak competitive positions. But fears regarding the long-term prosperity of the nation’s many sound companies make no sense. These businesses will indeed suffer earnings hiccups, as they always have. But most major companies will be setting new profit records 5, 10 and 20 years from now.
Let me be clear on one point: I can’t predict the short-term movements of the stock market. I haven’t the faintest idea as to whether stocks will be higher or lower a month — or a year — from now. What is likely, however, is that the market will move higher, perhaps substantially so, well before either sentiment or the economy turns up. So if you wait for the robins, spring will be over.
A little history here: During the Depression, the Dow hit its low, 41, on July 8, 1932. Economic conditions, though, kept deteriorating until Franklin D. Roosevelt took office in March 1933. By that time, the market had already advanced 30 percent. Or think back to the early days of World War II, when things were going badly for the United States in Europe and the Pacific. The market hit bottom in April 1942, well before Allied fortunes turned. Again, in the early 1980s, the time to buy stocks was when inflation raged and the economy was in the tank. In short, bad news is an investor’s best friend. It lets you buy a slice of America’s future at a marked-down price.
Over the long term, the stock market news will be good. In the 20th century, the United States endured two world wars and other traumatic and expensive military conflicts; the Depression; a dozen or so recessions and financial panics; oil shocks; a flu epidemic; and the resignation of a disgraced president. Yet the Dow rose from 66 to 11,497.
You might think it would have been impossible for an investor to lose money during a century marked by such an extraordinary gain. But some investors did. The hapless ones bought stocks only when they felt comfort in doing so and then proceeded to sell when the headlines made them queasy.
Today people who hold cash equivalents feel comfortable. They shouldn’t. They have opted for a terrible long-term asset, one that pays virtually nothing and is certain to depreciate in value. Indeed, the policies that government will follow in its efforts to alleviate the current crisis will probably prove inflationary and therefore accelerate declines in the real value of cash accounts.
Equities will almost certainly outperform cash over the next decade, probably by a substantial degree. Those investors who cling now to cash are betting they can efficiently time their move away from it later. In waiting for the comfort of good news, they are ignoring Wayne Gretzky’s advice: “I skate to where the puck is going to be, not to where it has been.”
I don’t like to opine on the stock market, and again I emphasize that I have no idea what the market will do in the short term. Nevertheless, I’ll follow the lead of a restaurant that opened in an empty bank building and then advertised: “Put your mouth where your money was.” Today my money and my mouth both say equities.
Warren E. Buffett is the chief executive of Berkshire Hathaway, a diversified holding company.
More Articles in Opinion » A version of this article appeared in print on October 17, 2008, on page A33 of the New York edition.

The Sky is not Falling Part 6B Dollar Cost Averaging

Going back to the post where I originally introduced the concept of DCA:
The Sky is not Falling Part 6 Dollar Cost Averaging
In there I had a video. The chart being held is not visible at all so I took the liberty of reproducing the figures. Its in the Excel attachment below (for those in Blog Spot or Livejournal http://cornholiogogs.multiply.com/journal) Do yourself a favor , make a choice and take 90 seconds to do the math. Then get back to me.
Ed

The Sky is not Falling Part 6 Dollar Cost Averaging

Not sure when to buy? Study this technique of dollar cost averaging It makes the inevitable dips in the market work for you. I apologize for my choice of youtube video, the guy needs to learn how to talk. Still, its the same thing. Below are two separate articles on DCA that dovetail nicely into the provided video. But since I am all about balance specially after two or three six packs, I included at the very end two viewpoints (in the form of links not text) that counter the traditional DCA method. They do caveat their reasoning nicely though. All suggest you invest. Almost any personal finance book will have this concept.
Ed




http://beginnersinvest.about.com/cs/newinvestors/a/041901a.htm
Dollar Cost Averaging
A Technique that Drastically Reduces Market Risk
By Joshua Kennon, About.com
See More About:investing strategiesstocksdirect stock purchase plansDollar cost averaging is a technique designed to reduce market risk through the systematic purchase of securities at predetermined intervals and set amounts. Many successful investors already practice without realizing it. Many others could save themselves a lot of time, effort and money by beginning a plan. In this article, you will learn the three steps to beginning a dollar cost averaging plan, look at concrete examples of how it can lower an investor’s cost basis, and discover how it reduces risk.
Dollar Cost Averaging: What is It?
Instead of investing assets in a lump sum, the investor works his way into a position by slowly buying smaller amounts over a longer period of time. This spreads the cost basis out over several years, providing insulation against changes in market price.
Setting Up Your Own Dollar Cost Averaging Plan
In order to begin a dollar cost averaging plan, you must do three things:
Decide exactly how much money you can invest each month. Make certain that you are financially capable of keeping the amount consistent; otherwise the plan will not be as effective.
Select an investment (index funds are particularly appropriate, but we will get to that in a moment) that you want to hold for the long term, preferably five to ten years or longer.
At regular intervals (weekly, monthly or quarterly works best), invest that money into the security you’ve chosen. If your broker offers it, set up an automatic withdrawal plan so the process becomes automated.
An Example of a Dollar Cost Averaging Plan
You have $15,000 you want to invest in Sprint FON common stock. The date is January 1, 2000. You have two options: you can invest the money as a lump sum now, walk away and forget about it, or you can set up a dollar cost averaging plan and ease your way into the stock. You opt for the latter and decide to invest $1,250 each quarter for three years. (See chart for math of dollar cost averaging plan.)
Had you invested your $15,000 in January 2000, you would have purchased 264.46 shares at $56.72 each. When the stock closed for the year in December of 2002 at $13.69, your holdings would only be worth $3,620!
Had you dollar cost averaged into the stock over the past three years, however, you would own 746.21 shares; at the closing price, this gives your holdings a market value of $10,216. Although still a loss, Sprint FON stock must only go up to $20.10 for you to break even, not $56.72, which would have been required without the dollar cost averaging.
To go a step further, without dollar cost averaging you would break even at $56.72. With dollar cost averaging, you would have turned a profit of $27,326 when the stock hit that price thanks to your lower cost basis ($56.72 sell price - $20.10 average cost basis = $36.62 profit x 746.21 shares = $27,326 total profit.)

Combining the Power of Dollar Cost Averaging with the Diversification of a Mutual Fund
Index funds are passively managed mutual funds that are designed to mimic the returns of benchmarks such as the S&P 500, the Dow Jones Industrial Average, etc. An investor that puts money into a fund designed to mimic the Wilshire 5000, for example, is literally going to own a fractional interest in every one of the five thousand stocks that make up that index. This instant diversification comes with the added bonus. Traditionally, management fees of passive funds are less than one-tenth those of their actively managed counterparts. Over the course of a decade, for example, this can add up to tens of thousands of dollars the investor would have paid in fees to the mutual fund company that, instead, are accruing to his or her benefit.
The dollar cost averaging component reduces market risk, while the index fund investment reduces company-specific risk. This combination can be among the best investment options for individuals looking to build up their long term wealth by having a portion of their portfolio in equities.
Table 1: Sprint FON with Dollar Cost Averaging Plan
Invest date Amount Price per share Shares purchased
Jan. 2000 $1,250 $56.72 22.04
Apr. 2000 $1,250 $54.19 23.07
Jul. 2000 $1,250 $31.34 39.27
Oct. 2000 $1,250 $22.60 53.31
Jan. 2001 $1,250 $22.10 56.50
Apr. 2001 $1,250 $19.05 65.62
Oct. 2001 $1,250 $18.13 68.95
Jan. 2002 $1,250 $16.14 77.45
Apr. 2002 $1,250 $14.58 85.73
Jul. 2002 $1,250 $8.66 144.34
Oct. 2002 $1,250 $11.64 107.39
Total $15,000 $20.10 avg. 746.21 shares owned


http://www.investopedia.com/terms/d/dollarcostaveraging.asp
Dollar-Cost Averaging - DCA
The technique of buying a fixed dollar amount of a particular investment on a regular schedule, regardless of the share price. More shares are purchased when prices are low, and fewer shares are bought when prices are high.
Also referred to as a "constant dollar plan".
Eventually, the average cost per share of the security will become smaller and smaller. Dollar-cost averaging lessens the risk of investing a large amount in a single investment at the wrong time.
For example, you decide to purchase $100 worth of XYZ each month for three months. In January, XYZ is worth $33, so you buy three shares. In February, XYZ is worth $25, so you buy four additional shares this time. Finally, in March, XYZ is worth $20, so you buy five shares. In total, you purchased 12 shares for an average price of approximately $25 each.
In the U.K., it is known as "pound-cost averaging".



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http://moneycentral.msn.com/content/P104966.asp
http://asktheexpert.blogs.money.cnn.com/2008/02/05/dont-buy-into-dollar-cost-averaging/

The Sky is not Falling Part 5 Using Fear to your advantage

If most people were right, most people would be rich. If that's true then do the opposite of what most people do. But in the words of Joe Jackson "Oh it's oh so nice to give advice but oh so hard to do." Well learn from Chris Perruna.

Ed
http://www.chrisperruna.com/2007/07/24/make-millions-selling-fear/
Logo
Make Millions Selling Fear
Author: Chris
I don’t have many quality “stock of the day” case studies to provide due to the recent action in the market. My market research has been spitting out very little in the way of opportunity so I am currently holding several partial positions and an increasing cash position (from sells last week). My research is still telling me that most of the opportunities are too far extended to take an ideal risk to reward position so I will continue to write about the subject of fear.
I spoke about the fear of losing money yesterday and want to extend that into the fear that the media creates, specifically book authors. I am going to repost an edited version of an article I wrote last year for many of the newer readers of the blog.
See these links for the originals:
Baby Boomer Bust is BULL
‘Crisis Authors’ feed on people’s Fears!
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Authors and their sheep followers continue to predict coming great depressions, stock market crashes and real estate busts. I am not saying that it can’t happen but their readers sure make them rich by eating up most of their negative crap.
What happened to the predictions from the books in the late 1970’s and early 1980’s? Glance at the book titles from the 1970’s and 1980’s and then read the book titles from today (several listed below). Are you seeing a pattern?
I didn’t go back to the 50’s or 60’s but I know I could find similar titles and probably many more in the 1930’s. My point is: don’t believe everything you read and stop panicking by reading books from theorists (talkers, not doers). I give credit to many of the 1970’s and 1980’s books listed below to Martin Schwartz and his book Pit Bull as he calls them out in a great chapter. I highly recommend his book Pit Bull as it is a great summer read while at the beach or pool.
Theorists make money selling books that sell fear while investors and entrepreneurs make money by following their ideas hedging against a possible crisis. I aim to learn from history and history shows us that these “crisis” books will always sell during tough times. Readers eat up this garbage because most people are trapped in the rat race working their asses off just trying to stay afloat. Their attitudes are typically piss-poor and they love to read about negative events that may be catastrophic (especially a crash that may hurt others).
Also notice how the same authors try to write books when the market starts to go back up again. For example, Howard J Ruff was writing about the crisis in 1979 through 1982 but then started to write about how to invest as a serious investor in 1987. Guess what: he was on the wrong end of the crisis in 1982 (the tail end) and the wrong end of the boom in 1987 (crash later that year). These “fools” are always late to the party and sell millions of books to the “average” person that engrosses themselves in fear! Fear is just another word for a negative mental attitude. Success and opportunities will not gravitate toward the individual that is consumed with fear.
These people, both now and then are not very accurate, they sell garbage in my opinion and I ignore it at all costs! I just hope many of you can do the same and make decisions based on what “YOU” see and not based on book sellers! Invest for now and ignore the garbage but be prepared for a possible crisis. Take necessary steps but don’t radically change your life based upon the writings of a few authors that probably don’t invest themselves. They typically make a living selling books, not the plans and systems they claimed to have used while acquiring great wealth.
Before I get to the examples, I want to stress that I am not saying that a crisis can’t happen in modern America because it can. The dollar is depreciating, debt is mounting and the baby boomers are headed for retirement but this scenario has taken place in the past both in America and in other civilizations. It may not be the exact same situation but the point is to take care of your own business and investments and beware of the crisis authors. They sell fear and are great at what they do because a sucker is born every minute. Don’t be that sucker!
Books from the Past:
* Crisis Investing: Opportunities and Profits in the Coming Great Depression by Douglas Casey (Hardcover - Jul 1980)
* Crisis Investing for the Rest of the 90’s by Douglas Casey (Hardcover - Oct 1993) - WOW was this wrong in 1993!
* What the smart money is betting on in 1985: By Doug Casey by Douglas R Casey (Unknown Binding - Jan 1, 1985)
* The Coming Currency Collapse and What You Can Do About It by Jerome F. Smith (Hardcover - Sep 1980)
* Profits from silver by Jerome F Smith (Unknown Binding - 1983)
* How you can profit from the coming devaluation by Harry Browne (Unknown Binding - 1970)
* You can profit from a monetary crisis by Harry Browne (Unknown Binding - Jan 1, 1975)
* How to Prosper During the Coming Bad Years - A Crash Course on Personal and Financial Survival by Howard J. Ruff (Mass Market Paperback - 1979)
* How to Prosper in the Coming Bad Years by Howard J. Ruff (Mass Market Paperback - Jul 1981)
* Making money: Winning the battle for middle-class financial success by Howard J Ruff (Paperback - 1986)
* Howard Ruff’s crash course for the serious investor by Howard J Ruff (Unknown Binding - Jan 1, 1987)
* How to Prosper During the Coming Bad Years by Howard J. Ruff (Paperback - April 1984)
Books from Today:
* The Coming Collapse of the Dollar and How to Profit from It : Make a Fortune by Investing in Gold and Other Hard Assets by James Turk and John Rubino (Hardcover - Dec 28, 2004)
* The Coming Economic Collapse : How You Can Thrive When Oil Costs $200 a Barrel by Stephen Leeb and Glen Strathy (Hardcover - Feb 21, 2006)
* Defying the Market: Profiting in the Turbulent Post-Technology Market Boom by Stephen Leeb and Donna Leeb (Hardcover - Jun 3, 1999)
* Empire of Debt : The Rise of an Epic Financial Crisis (Hardcover) by William Bonner, Addison Wiggin (November 11, 2005)
* The Great Bust Ahead: The Greatest Depression in American and UK History is Just Several Short Years Away. This is your Concise Reference Guide to Understanding Why and How Best to Survive It (Paperback) by Daniel A. Arnold (November 25, 2002)
Like this article?

The Sky is not Falling Part 4 A Study in Human Psychology

http://www.chrisperruna.com/2007/03/07/a-study-in-human-psychology/

Logo
A Study in Human Psychology
Author: Chris
The stock market is a study in human psychology with human emotion driving all market action. The market acts as a pendulum, which swings with emotion and psychology. These emotions can include but are not limited to greed, fear, hope, excitement, sadness, etc. Since the market is fueled by humans, these emotions never change. As Jesse Livermore once pointed out; the names change, the players change and the prices change but the patterns always repeat because they are patterns based on human emotion.
030707_fear_greed.PNG
Emotions can and will determine your success or failure while trading the stock market. When you learn to control emotions, you are at least half way towards winning the battle. Without control of your emotions, no matter how successful a system or set of rules, consistent profits will be difficult to obtain.
The stock market is not the only place in life where human emotions are constantly flowing and can be followed or charted. While driving in the car over the past few weeks, I have heard human emotions at their highest and lowest levels while listening to sports talk radio. I am in the NY metropolitan area so the main subjects are the Yankees, Mets, Giants and Knicks. It amazes me to hear callers on a day after their team loses versus callers on a day after their team wins (many times the same exact callers).
030707_up_down.PNG
I want to present two examples of human emotions at their best. One from the stock market and one from the sports world; the same emotions surface but they take place in different entities.
Stock Market Example:
How does the average investor react after buying a stock that:
a. Goes up in price:
b. Goes down in price:
When scenario ‘A’ takes place, most average investors will start to hope that it keeps going up but as the stock continues its advance, fear starts to overcome their emotions. They now fear that the stock may come back down and they will lose the current profit. On up days, the investor feels like a genius but is scared to allow the profit to deteriorate so he looks for every reason to sell and hate the stock. On down days, the investor has all the hope in the world that the stock will recover and he loves the stock even though it is telling him that his judgment may be wrong. As a result of these emotions, they will sell the stock with a small profit with no other reason justifying the sell. The investors kicks himself when he sees that the stock he sold for a small profit is now trading 50% higher without any major selling violations along the way.
030707_fear_guilt.gif
In scenario ‘B’, the investor starts to hope that the price will rebound and the negative action is temporary. The proper research was done and the investor believes that he has a great stock and it has to be successful (the market is wrong he thinks to himself). The investor starts making excuses as to why the stock is now in negative territory. He continues to hope for a recovery and will actually purchase additional shares at the lower price by averaging down. By averaging down, he convinces himself that the entry price is now more favorable with a potential for a larger profit. The stock continues to slide and he keeps hoping for a rebound and may buy more shares by putting good money after bad.
As the stock slides, he promises himself that he will sell on the first rebound to get out with minimal damage. Finally, the stock is up a few percent but volume is higher so he talks himself into holding onto the stock because this is the start of a rebound. Emotions play with his mind and he completely ignores his rules and system. As the rebound dries up, the downtrend continues and he is now just looking to get out on the next rebound. The rollercoaster will continue until he can’t take it anymore and probably sells near the bottom. He finally sells for a large loss and walks away with his tail between his legs.
Sports Talk Radio Example:
How does the average sports fan react and feel after a win or a loss by their team:
030307_1050_espn_logo.png
a. Their team Wins:
b. Their team Loses:
In scenario ‘A’, fans will call up the radio station and explain why their team is the best in their division and how they are going to win it all. Some fans suggest that the coach should be given a contract extension and the management is the best in all of sports. Other fans are already talking about a dynasty and a championship next year before even reaching and winning the championship game this year. Players should get contract extensions and everyone is an MVP candidate. Nothing can go wrong because their team just won (one game – that’s all).
In scenario ‘B’, fans will completely flip flop from what they were saying last week, last month or even last night. The change of emotion is absolutely amazing when listing to sports talk radio on a daily basis. Yesterday they were crowing the team champions and today they explain why the team is a bunch of bums that won’t make the playoffs. The coach should be fired, the general manager is garbage and everyone should be traded.
030307_wfan_logo.png
By listening to the radio, I can hear human emotion whip around the same way it does on a daily chart when news hits the wire. Looking at my charts last night; I can see human emotions and reaction over the past week. Up and down with wild swings and great volatility. The newspapers are spilling over with articles from talking heads about what is happening. The evening and local news stations are now featuring so-called experts on the market after the 400 point slide. They have every Tom, Dick and Harry claiming to be an expert on knowing why the market dropped, how the glitch happened and where the market is headed. I wonder what these fools will say if the market gains 450 points today; I bet they will completely flip-flop like the sports fan.
Human emotion is amazing and I would love to study psychology on a higher level because it fascinates me. Watching the market, playing sports and listening to sports talk radio gives me a front row seat as to how most people react to nonsense. I never realized this until I started to trade but people are neurotic and change their thoughts as quickly as the second hand changes on a clock. I see these reactions at the poker as well but the clearest change in human emotion must be on the radio. Try it out and listen to how fans can switch from one extreme to another in the matter of one day and one win or loss.
As Jesse Livermore said: “There is nothing more important than your emotional balance”
But even he couldn’t follow his own advice in the end. Maybe because he was only human!

The Sky is not Falling Part 3 More about Investor fear

As promised more information on how to really interpret financial crisis. Don't stop here and get yourself educated.

Ed

http://www.investopedia.com/articles/01/030701.asp
When Fear And Greed Take Over
by Investopedia Staff, (Investopedia.com) (Contact Author | Biography)


There is an old saying on Wall Street that the market is driven by just two emotions: fear and greed.Although this is an oversimplication, it can often be true. Succumbing to these emotions can have a profound and detrimental effect on investors' portfolios and the stock market.

In the investing world, one often hears about the juxtaposition between value investing and growth investing, and although understanding these two strategies is fundamental to building a personal investment strategy, it is as important to understand the influence of fear and greed on the financial markets. There are countless books and various courses devoted to this topic. Here our goal is to demonstrate what happens when an investor gets overwhelmed by one or both of these emotions.
Greed's Influence
So often investors get caught up in greed ("excessive desire"). After all, most of us have a desire to acquire as much wealth as possible in the shortest amount of time.
The Internet boom of the late 1990s is a perfect example. At the time it seemed all an advisor had to do was simply pitch any investment with a ".com" at the end of it, and investors leaped at the opportunity. Buying activity in Internet-related stocks, many just start-ups, reached a fever pitch. Investors got greedy, fueling further greed and leading to securities being grossly overpriced, which created a bubble. It burst in mid-2000 and kept leading indexes depressed through 2001. For more on the dotcom bubble and other market crashes, see Greatest Market Crashes.
This get-rich-quick mentality makes it hard to maintain gains and keep to a strict investment plan over the long term, especially amid such a frenzy, or as the former Federal Reserve chairman, Alan Greenspan, put it, the "irrational exuberance" of the overall market. It's times like these when it is crucial to maintain an even keel and stick to the basic fundamentals of investing, such as maintaining a long-term horizon, dollar-cost averaging and avoiding getting swept up in the latest craze.
A Lesson From "The Oracle Of Omaha"
We would be remiss if we discussed the topic of not getting caught up in the latest craze without mentioning a very successful investor who stuck to his strategy and profited greatly. Warren Buffett showed us just how important and beneficial it is to stick to a plan in times like the dotcom boom. Buffett was once heavily criticized for refusing to invest in high-flying tech stocks. But once the tech bubble burst, his critics were silenced. Buffett stuck with what he was comfortable with: his long-term plan. By avoiding the dominant market emotion of the time - greed - he was able to avoid the losses felt by those hit by the bust. (Interested in what companies Warren Buffett is buying and selling? Check out Coattail Investor, a subscription product tracking some of the best investors in the world.)
Fear's Influence
Just as the market can become overwhelmed with greed, the same can happen with fear ("an unpleasant, often strong emotion, of anticipation or awareness of danger"). When stocks suffer large losses for a sustained period, the overall market can become more fearful of sustaining further losses. But being too fearful can be just as costly as being too greedy.
Just as greed dominated the market during the dotcom boom, the same can be said of the prevalence of fear following its bust. In a bid to stem their losses, investors quickly moved out of the equity (stock) markets in search of less risky buys. Money poured into money market securities, stable value funds and principal-protected funds - all low-risk and low-return securities. In fact 2002 saw the largest amount of outflows, about US$40 billion, from the equity markets since 1988, a year after one of the worst stock market crashes in history, and a record $140 billion flowed into the bond market.
This mass exodus out of the stock market shows a complete disregard for a long-term investing plan based on fundamentals. Investors threw their plans out the window because they were scared, overrun by a fear of sustaining further losses. Granted, losing a large portion of your equity portfolio's worth is a tough pill to swallow, but even harder to digest is the thought that the new instruments that initially received the inflows have very little chance of ever rebuilding that wealth.
Just as scrapping your investment plan to hop on the latest get-rich-quick investment can tear a large hole in your portfolio, so too can getting swept up in the prevailing fear of the overall market by switching to low-risk, low-return investments.
The Importance of Comfort Level
All of this talk of fear and greed relates to the volatility inherent in the stock market. When investors lose their comfort level due to losses or market instability, they become vulnerable to these emotions, often resulting in very costly mistakes.
Avoid getting swept up in the dominant market sentiment of the day, which can be driven by a mentality of fear and/or greed, and stick to the basic fundamentals of investing. It is also important to choose a suitable asset allocation mix. For example, if you are an extremely risk averse person, you are likely to be more susceptible to being overrun by the fear dominating the market, and therefore your exposure to equity securities should not be as great as those who can tolerate more risk.
Buffett was once quoted as saying, "Unless you can watch your stock holding decline by 50% without becoming panic-stricken, you should not be in the stock market." For more on asset allocation, check out Asset Allocation Strategies and Five Things To Know About Asset Allocation.

Easier Said Than Done
Keep in mind this isn't as easy as it sounds. There's a fine line between controlling your emotions and being just plain stubborn. Remember also to re-evaluate your investment strategy and allow yourself to be flexible to a point, and remain rational when making decisions to change your plan of action.
Conclusion
You are the final decision-maker for your portfolio and thus responsible for any gains or losses in your investments. Sticking to sound investment decisions while controlling your emotions, whether it be greed or fear, and not blindly following market sentiment is crucial to successful investing and maintaining your long-term strategy. But beware: never wavering from an investment strategy during times of high emotions in the market can also spell disaster. It's a balancing act that requires you to keep your wits about you.
by Investopedia Staff, (Contact Author | Biography)
Investopedia.com believes that individuals can excel at managing their financial affairs. As such, we strive to provide free educational content and tools to empower individual investors, including more than 1,200 original and objective articles and tutorials on a wide variety of financial topics.

Sky is not Falling Part 2

Below are simple easy to understand tips on comprehending the market no matter what time and situation. Believe me, just because they came from the top of my head does not make me a genius. All the result of reading books, listening to tapes, going to seminars etc. I will provide links and videos when I can but the best is to really go to the bookstore or library and read up on personal finance. Stay away from any sales people at least for now. One thing I can guarantee you is that you have better intentions for yourself and your family than they do. Don't think trust in a commission sales person is a way of avoiding the learning for yourself.
I am telling you the same things I said when I was representing several companies. Now I have no formal ties to the financial industry and I still believe in educating people .
Ed

• Investment is not about timing the market (bob and weave ) its time in the market.
• If you are reacting to headlines you are too late.
• If you are reacting to headlines then so is everybody else.
• The Stock market is the only market on Earth that when things are on sale, people run away.
• Markets crash, deal with it.
• if you get into the market be in for the right reason.
• No asset class over a fifteen year period will outperform equities. But in order to take advantage of that you will have to stomach the hiccups.
• A good analogy of the performance of the market is a little kid playing with a yo-yo walking up stairs. I can not make it any simpler. The prices of great companies will go up and down on their way up.

http://www.youtube.com/watch?v=IN2NjauPM9I

The Sky is not Falling Part 1A

This was the text from the previous "1A" that was not included earlier. For those of you too lazy to click the previous link. I have more to share with you in these times of panic and uncertainty. Please read these and other good financial information. One thing you can not argue with the market is it's precise track record.


Ed
http://www.myinvestmentcounselor.com/images/Mkt%20Fear.pdf
When Fear Turns Ugly
"Fear" is a powerful emotion designed to prepare human beings for battle. For
ancient man when the unknown could be a saber-toothed tiger or any mortal enemy
crouching in the dark, a fear-driven preservation instinct took over. An adrenalin rush
sped up the heartbeat, generating the energy and resistance to fatigue necessary for closeorder
combat.
Except for those were actually eaten by the tiger, the physical release engendered
by the fight was a healthy aspect as survival skills were honed. Modern man has a more
complex challenge, as psychological fears demand responses that are cerebral in nature,
not physical.
Threats to financial security are tigers in the dark. During significant stock
market declines, as values in personal portfolios and retirement accounts erode, anxiety,
uncertainty, and doubt are natural responses. So is anger. You may want to pummel
your broker, advisor, or brother-in-law who gave you a hot tip that imploded. Feeling
fear is understandable. We would not be human if we weren’t fearful and angry once in
awhile.
It is okay to be fearful in times of stock market distress. As Nick Murray, a
fellow financial advisor and Wall Street philosopher, recently observed: "It is okay to feel
the fear, but it’s not okay to act on the fear."
It may be that you are retired or getting close to retirement and erosion of stock
values is very unsettling. It may be that you have more of your money exposed to equity
market volatility now than you have had in the past. Your fears and concerns as markets
turn ugly are valid and understandable. The media doesn’t help, with tales of Nasdaq
woes, mutual funds down 70% or more, dot com destruction, and jobs being lost.
Logic does not help when you are fearful. You do not want to hear that the
crouching tiger just ate your neighbor and has a full stomach, and he is not interested in
devouring you at this time. Logic may say, "Don’t move…don’t threaten the tiger…it
will get bored soon and move away." But your emotional side may prevail, prompting
you to scream and run away. The danger may be a failure to notice the cliff just behind
you, as your response to fear precipitates an even bigger and potentially more fatal
problem.
Most of the time our fears are not actualized. I remember intense fears as a young
advisor in Vietnam in 1964. In February, 2001, after 37 years, I was back in Ho Chi
Minh City (Saigon) and guess what — we won the war! The biggest, most modern
skyscraper in town has "Citicorp" emblazoned on the top, the American dollar is as easily
spent as the Vietnamese dong, and Communists are sounding more and more like
capitalists. Ho Chi Minh City even has a nascent stock exchange. It is small, but it is a
start. Fear notwithstanding, life has moved on and positive progress has continued.
Remember how fearful markets were in the early 70s when Vietnam was ugly and
as much about Kent State as it was Marine Divisions in Danang? Remember the Agnew-
Nixon scandals, the energy crisis, OPEC as the tiger du jour?
Suppose you had dumped all of your stocks just after the Crash of 1987? Or
when markets dived as the Gulf War was threatened and the press speculated about
another Vietnam?
The media loves the "Apocalypse Now" syndrome because it generates
readership and viewership. Remember when the deficit was going to devour all of our
capital? The banking system was going to collapse? Recessions, layoffs, downsizings?
The destruction of AT&T, IBM? Like Saigon, stock markets recovered from every crisis
and positive uptrends reappeared.
Does this mean that if you have a stock, a mutual fund, or an account that is down
20% to 30% or more, you should do nothing? No. But rational action should overcome
emotional responses so that you do not do the wrong thing.
If you owned Cisco or Intel at a higher price, should you run away now that they
are cheaper? You may have lost value but you will only lose real money if you trigger a
sell with no plan for recovery. And blindly selling out may be the worst mistake of all. It
is okay to feel fear. But you may be wise to confront your fear, stare down the tiger, and
add additional capital while those around you are still acting on their fears and keeping
prices low.
When you look back five or ten years from now you will realize that the tigers of
today will seem like pussycats tomorrow. They always do.
___________________
Lewis Walker,
******************************

Sky is not Falling Part 1

I really have a lot to say on the topic but chew on this (link below) or P.M. me in the meantime. Between all the financial institutions in trouble people's first reaction is to sell what they have the prices are depreciating. You will only lose if you allow yourself to. If you let emotions dictate your reactions. These market hiccups are inevitable. If you want to be better off do the opposite of the herd and right now the herd is selling.
Ed



http://www.myinvestmentcounselor.com/images/Mkt%20Fear.pdf