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Tuesday, January 22, 2008

Be patient, don't gamble!

"The best way to think about investments is to be in a room with no one else and just think...if that doesn't work, nothing else will." - Warren Buffett

In my previous post, I mentioned about a stock that went from $13 to $130 in less than a year. In fact, if you look at the company fundamentals, it is very solid. The CEO himself has a huge share in the company. Since that last post, the share price has plummeted from $90 to a low of $48 before recovering at $53 today. In fact, if you have been following the stock market situation, you will be shocked to see so much selling going on now. It doesn't matter if the company is reporting great earnings like Apple today - everyone is just selling. Immediately after last night's market meltdown in Asia (you can follow the live news at cnbc), the fed rate was cut by 75 basis points (overnight) and that appeared to have lifted the stocks up a bit this morning. Nevertheless, if you haven't closed your long positions, chances are you are making some losses. In this economic turmoil, I think it is best to stay defensive - meaning, don't buy into rallies, rather - sell to take back some of your cash. Actually, the Baltic Drys Index (of which the company I mentioned is a component) was down a couple of weeks ago before this insane selling began. By the way, this index is perhaps a better economic indicator than stocks and bonds indices because it is totally devoid of speculation. Googling for the baltic returned me this blog (the post seems outdated though).

Even Google's stocks got beaten badly today. I think there is going to be a temporary relief from the surprise cut, as you can see in Asia stocks today. But after that, what else? There are very good financial blogs you can visit for information or discussion on the stock market such as Bill Cara, Wallaston Investments and others you can find on their blogrolls or posts.

In Bill's blog, he mentioned a passage from the bible taken from the Book of Ecclesiastes, Chapter 3.

There is a time

1 To every thing there is a season, and a time to every purpose under the heaven:
2 A time to be born, and a time to die; a time to plant, and a time to pluck up that which is planted;
3 A time to kill, and a time to heal; a time to break down, and a time to build up;
4 A time to weep, and a time to laugh; a time to mourn, and a time to dance;
5 A time to cast away stones, and a time to gather stones together; a time to embrace, and a time to refrain from embracing;
6 A time to get, and a time to lose; a time to keep, and a time to cast away;
7 A time to rend, and a time to sew; a time to keep silence, and a time to speak;
8 A time to love, and a time to hate; a time of war, and a time of peace.

Similarly, there is a time for the market to go high and low. Although this post is unlike my previous posts where I mostly talked about self-introspection and so on, I hope I can urge you to act wisely with your investments. Don't panic (like I did, hahahaha), don't be too greedy, be patient, don't gamble. Good luck!

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