Thursday, October 9, 2008

Stock market: PAIN!

Note to self: trust your instincts. Remember for future events to take advantage of them.

Should have went all cash back in May when I "knew" the market would start falling again in June based on prior market corrections (2001).
Should have shorted financials when I knew Lehman was in trouble based on information about their Alt-A loans.
Should have took the small loss on my bad investments rather than "wait for a recovery" and take a large loss.
Should not have tried to time the bottom. Wait for the market to demonstrate a bottom. Better to miss the 10% on the way up than assume you're 10% from bottom and find out it's 30% or more!
Should have seen the financial crisis when the price of homes far outpaced wages and yet houses were still selling.
Should have seen the financial crisis when lenders were lending at below 1.0 DSCR based on future value!
Should have seen the financial crisis when the stock market went parabolic.
Should have seen the economic crisis when bubble economies started showing up.
Should have seen the economic crisis when there's too much or too little liquidity. 1929: no liquidity. 2003-2007: too much liquidity. 2008: no liquidity.

Excessive monetary supply in the market creates over-leverage in an effort to make capital work. Greed makes the capital work inefficiently, and an abundance of capital creates indifference to risk ("there's plenty more where that came from").

We're seeing a generation/market/political cycle. As they say, "history repeats itself", because the new generation thinks they're smarter than the old. I hope I'm wise enough to learn from the old, and not let hubris blind me to the truth or let greed minimize risk through justification.