Saturday, December 20, 2014 02:26pm
North Adams, MA now: 32 °   
Send news, tips, press releases and questions to info@iBerkshires.com
The Berkshires online guide to events, news and Berkshire County community information.
SIGN IN | REGISTER NOW   

Home About Archives RSS Feed
@theMarket: Stay the Course
By Bill Schmick On: 10:55AM / Sunday October 28, 2012
Important
0
Interesting
0
Funny
0
Awesome
0
Infuriating
0
Ridiculous
1
This quarter's earnings season has not been kind to stocks. Corporate results continue to disappoint and forward guidance has been less than rosy. The stock markets have drifted lower as a result, providing us with a much-needed consolidation.

Unfortunately, stock markets need these periodic pullbacks. As I have written before, expect three to four such pullbacks per year of between 3-6 percent in the equity markets. It is the cost of doing business. Without them, financial markets would be just too dangerous for the average investor. And I have never met a person or firm that can trade those declines consistently and successfully, so don't try.

Now is the time, however, for a little hand holding. About now my phone begins to ring regularly with client calls. They always begin this way:

"Have you changed your mind about the markets?"

"No," I reply, waiting for the next question.

"So how much lower do you thing stocks can go?"

The real question behind that one is "How much more pain do you expect me to endure?" Clients are expressing what is called loss aversion, which is part of the Prospect Theory. This theory was coined by two Israeli psychologists Daniel Kahneman and Amos Tversky back in the '90s. They contend that people value gains and losses differently. Losses, they say, have more emotional impact than an equivalent amount of gains.

In my experience, they are absolutely right. Rarely, if ever, do I receive calls when the markets are roaring. On occasion I may receive a call from someone who is worried about how high the markets have climbed, but once again I believe the concern is more about the avoidance of loss (pain) than any giddiness based on how much the investor has made.

Now, pain has a profound effect on us humans. It can make us take irrational actions. If I think back to times in my life when I was in severe pain, all I wanted was for the pain to stop and I would do just about anything to feel better. And this statement is coming from a guy who has an extremely high tolerance for pain.

In the investment world, this aversion to losses has caused many a good man and woman to dump their holdings at the absolute worst time. Over and over again, I have seen this wholesale selling capitulation sometimes on the very same day that markets have hit their bottom.

Of course, we all know that we should never make any decisions based on emotions but we do it anyway. That's why we are who we are. I'm just asking readers and clients alike to try and be honest with their decision to buy, sell or hold. In my investment experience, the correct decision is to do the exact opposite that my emotions are telling me to do. If I can't do that, than most likely I should do nothing.

Bringing this home to today's markets, I would advise you to simply sit on your hands and do nothing. We are pulling back because third quarter earnings were a disappointment. But remember, those are earnings that have already occurred. They are not indicative of future earnings.

The elections are less than two weeks away and after that we confront the much-heralded "Fiscal Cliff." Since the markets dislike uncertainty, I would expect further volatility and declines until then. Rather than work yourself into a frenzy, just ignore the daily gyrations and keep your eye on the bigger picture. I expect the economy to strengthen, not weaken, from here and as such there are better times ahead.

Bill Schmick is registered as an investment adviser representative with Berkshire Money Management. Bill’s forecasts and opinions are purely his own. None of the information presented here should be construed as an endorsement of BMM or a solicitation to become a client of BMM. Direct inquires to Bill at 1-888-232-6072 (toll free) or email him at Bill@afewdollarsmore.com.




0 Comments
     
News Headlines
McCann Students Lauded for Leadership & Skill Building
BU Looking For More Use of Tanglewood Campus
Battalion Falls at Danville
Berkshire County Arc Receives Workplace Wellness Grant
Cultural Pittsfield This Week:Dec. 19-Jan. 4
Groundbreaking Ceremony Held at New Williamstown Senior Housing
Shakespeare In the Park Will Resume At Pittsfield Common
Park Street Reconstruction Will Be Completed In Spring
'Exodus: Gods and Kings': And Frogs, Too
Hotel on North Construction Third Complete

Bill Schmick is registered as an investment advisor representative and portfolio manager with Berkshire Money Management (BMM), managing over $200 million for investors in the Berkshires. Bill’s forecasts and opinions are purely his own and do not necessarily represent the views of BMM. None of his commentary is or should be considered investment advice. Anyone seeking individualized investment advice should contact a qualified investment adviser. None of the information presented in this article is intended to be and should not be construed as an endorsement of BMM or a solicitation to become a client of BMM. The reader should not assume that any strategies, or specific investments discussed are employed, bought, sold or held by BMM. Direct your inquiries to Bill at 1-888-232-6072 (toll free) or email him at Bill@afewdollarsmore.com Visit www.afewdollarsmore.com for more of Bill’s insights.

 

 

 



Categories:
@theMarket (152)
Independent Investor (208)
Archives:
December 2014 (4)
December 2013 (3)
November 2014 (4)
October 2014 (9)
September 2014 (5)
August 2014 (7)
July 2014 (2)
June 2014 (6)
May 2014 (9)
April 2014 (8)
March 2014 (6)
February 2014 (6)
January 2014 (8)
Tags:
Banks Jobs Euro Oil Currency Debt Ceiling Retirement Commodities Markets Stimulus Deficit Stocks Federal Reserve Japan Energy Congress Europe Election Bailout Economy Stock Market Recession Housing Debt Interest Rates Taxes Rally Crisis Pullback Fed Selloff Metals Europe Fiscal Cliff Greece
Popular Entries:
The Independent Investor: Understanding the Foreclosure Scandal
The Independent Investor: Don't Fight the Fed
@theMarket: QE II Supports the Markets
The Independent Investor: Does Cash Mean Currencies?
@theMarket: Markets Are Going Higher
The Independent Investor: General Motors — Back to the Future
The Independent Investor: How Will Wall Street II Play on Main Street?
The Independent Investor: Will the Municipal Bond Massacre Continue?
@theMarket: Economy Sputters, Stocks Stutter
The Independent Investor: Why Are Interest Rates Rising?
Recent Entries:
The Independent Investor: Election Investors Ignored
@theMarket: It's All About Oil
The Independent Investor: Is Russian Bear Back In His Cave?
The Independent Investor: The Truth Behind Black Friday
The Independent Investor: Is There a Doctor in the House?
The Independent Investor: The Pipeline Made Simple
@theMarket: Markets Are in Half Time
The Independent Investor: U.S. and China Square Off
The Independent Investor: Workers Get to Save More in 2015
@theMarket: All Clear


View All
Girls BB: S Hadley vs Hoosac
Friday night girls BB game final - Hoosac 65 South Hadley...
Girls BB: Mount Greylock vs...
Greylock beats Wahconah 52-46
Hotel on North Construction
Media and local officials got a tour of the under...
Hockey: Wahconah vs Taconic
Andrew Beaudoin scored two goals and added an assist to...
Swimming: St. Joe s vs...
Emma Whitney and Jesse Tobin each won two events to lead...
Boys BB: St. Joe vs Drury
The annual Gene Wein Boys Basketball Holiday Tournament got...
Boys BB: Monument Mountain vs...
The annual Gene Wein Boys Basketball Holiday Tournament got...
Girls BB: St. Joe's vs McCann
McCann Tech girl's win over St. Joe's, Monday night at...
Cheshire Church Christmas...
Cheshire residents walked or traveled by hayride to...
Sen. Downing's Holiday Open...
State Sen. Benjamin B. Downing held his annual holiday open...
Crane Winter Wonderland 2014
Santa's Winter Wonderland at the Crane Mansion.
Boys BB: Chicopee Comp vs...
The Drury boys basketball team recorded its first "W" in...
McCann LPN Graduates 2014
McCann Technical School's Licensed Practical Nursing...
MCLA Honors Adams Scholars
MCLA recognized the achievement of high school seniors who...
Wahconah Falls in State Title...
Wahconah never did get those points in a 43-0 loss in the...
Pittsfield March for Justice
More than 200 Pittsfield and county residents marched on...
Girls BB: S Hadley vs Hoosac
Friday night girls BB game final - Hoosac 65 South Hadley...
Girls BB: Mount Greylock vs...
Greylock beats Wahconah 52-46
Hotel on North Construction
Media and local officials got a tour of the under...
Hockey: Wahconah vs Taconic
Andrew Beaudoin scored two goals and added an assist to...
Swimming: St. Joe s vs...
Emma Whitney and Jesse Tobin each won two events to lead...
| Home | A & E | Business | Community News | Dining | Real Estate | Schools | Sports & Outdoors | Berkshires Weather | Weddings
Advertise | Recommend This Page | Help Contact Us | Privacy Policy| User Agreement
iBerkshires.com is owned and operated by: Boxcar Media 102 Main Street, North Adams, MA 01247 -- T. 413-663-3384 F.413-664-4251
© 2000 Boxcar Media LLC - All rights reserved