08/07/11 Desperado

In the nineties I watched the price of my home drift down for five long years before Bay Area real estate went parabolic for the next ten.

In 2001 I bought PTR in the low twenties based on the fact that Buffett was accumulating. It promptly sold off into the teens, and I was happy to unload it for a price in the mid twenties. PTR hit 250 about 5 years later.

I lay awake this morning wondering why the current market sell off finds me paradoxically in a great mood. It's because I've seen this movie so many times it sends a chill up my spine every time we hit Desolation Row.

Don't let anyone talk you out of buy-and-hold, bro. I can almost hear them pleading for us to come down off our fences before it's too late.

I transitioned into buy-and-hold mode in early May- 'bad timing' from a short-term perspective. But consider the following:

(a) In 1987, I was in the midst of applying to graduate business schools, and actively following the markets on a daily basis.
(b) My IRA was fully invested in October 1987.
(c) In mid-October, the DJIA sold off -12% from the August high.
(d) The short term pain caused many investors to sell.
(e) On October 19, the DJIA dropped another -22% to 1739. My portfolio was down over -35%!
(f) For a few weeks, it certainly 'felt' as if investors who bailed the previous week did the right thing. Unfortunately, many of them never reinvested. Partly because the market rebounded so quickly it never allowed them an 'easy' reentry point.
(f) Twelve years later, in January 2000, the DJIA hit an intraday high of 11,908. My IRA was still fully invested.

Now it's August 2011, and the DJIA has corrected -10%. I don't sense an inordinate degree of panic, so we may well see more downside the next few weeks.

There are no guarantees, of course. But the odds are on my side.

In the meantime-

Now it seems to me, some fine things
Have been laid upon your table
But you only want the ones
That you can't get

-let's get on with our lives.