News Columns & Blogs

No way to soften blow of a really bad year

This has been a bear of a year.

I thought I had it all figured out.

Thought I was pretty smart, actually.

I was bobbing and weaving, buying and selling — sticking to a system that had me cutting my losses early before they escalated and taking a profit at the right time before the love for a stock died.

I rode Apple (AAPL) like a hobby horse, riding it up, taking my profit, then buying it back on the dip to squeeze a little more out of it on the next climb.

I enjoyed quick profits on under-the-radar stocks like Enersys (ENS) and Atwood Oceanics (ATW).

I was up more than 10 percent in my portfolio and gloated when I got my brokerage statement that showed a graph of my performance versus the common benchmarks — my performance being far superior.

Then, all of that came to an end.

As I’ve written before, I finished the year down 10 percent, closed my fee-based trading account and stuck my money in a CD.

Others have fared much worse, losing half or more of their retirement savings with no clear sign of a rebound in sight.

Buy-and-holders like John Bogle, founder of Vanguard investments, say now is no time to cash out of the market.

Doing so means you are guaranteed to be saddled with your losses, they say.

But hanging on to your stocks with what increasingly seems blind faith can be hard to do.

There are some things pointing to a recovery.

The fact that the major indexes have already plunged more than 40 percent is actually a good thing in some people’s minds.

It means that a lot of the major selling has already taken place and stocks may be at prices more indicative of their fundamental values.

As price-to-earnings ratios get lower and lower, investors have more reason to believe that share prices will hold up as the bottom is reached and we emerge from this nasty downturn.

Although there are plenty who say the market could fall much farther at this point, their are an equal number of investment professionals who are seeing dollar signs in some downtrodden stocks.

There is another reason to take heart: The market only goes one way over time — up.

That was poignantly illustrated for me by an American Funds chart a reader sent me a while back, out of his annoyance at my market-timing view.

The color chart included presidents all the way back to the Great Depression. Through wars and recessions. Through every imaginable catastrophe, including 9/11, stocks continued their steady climb.

A 40 percent drop seems like staring into a giant abyss. But on that chart, assuming it’s printed again in 10 or 20 years, our current market chaos will appear as a mere blip.

Sometimes it pays to step back and take a larger view.

Here’s hoping that 2009 gets us back on that upward march again.