I have decided on a new, New Years Resolution:
For the rest of January & February I am going to stop looking at any stock prices. I am buying businesses and not stock tickers and everything I read at this board and elsewhere tells me the businesses are doing just fine. I will read the wise commentary on this board and follow my stocks quarterly reports, but I refuse to be distracted from the more important things in life by this gyrating stock market that has manic depression right now!
Just a personal decision.
Ah, but as implied by the wonderful Howard Marks (Oakmark) memo linked in this post…
I highly recommend that everyone read at least “My Prescription” paragraph on page 12. (I can’t copy/paste unfortunately.
The trick is not to ignore stock prices, but to ignore your emotions about them. Your tactic is half good because it will stop you from making bad sell decisions, but the other half of the game is to take advantage of the excessive reactions of others. Yes, in part by just buying strong companies regardless of the continuing decline in price, you are doing this. But if you and we spent a little more time evaluating the psychology and similar history, might we conclude that more is to come, and part of that more is more bargains for cash we have on hand?
I read the other day that the average market decline for a recessionary period is 37%. Psychology might easily take us to the August lows, which are not far off now.