BF Anderson Private Portfolio Management

The stock market surely has improved recently.  We feel, presently, that things are better and hope they continue to improve.  So far, the 2nd quarter of 2009 seems to be a prosperous one.  At the time of this writing the S&P 500 is up approximately 25.7% from its closing low on March 9th.  For the current quarter is it up approximately 6.5%.  Will it continue to perform to the upside?  We don’t know but surely hope so.   

There are 2 significant emotions that are associated with investing that everyone shares; Hope and Fear.  

Jesse Livermore believed that when you inject hope and fear into the business of speculation, you face a very formidable hazard, because you are apt to get the two confused and in reverse positions.  

In speculation, when the market goes against you, you hope every day will be the last day – and you lose more than you should.  It is at this time when you need to be fearful.

The successful trader has to fight these two deep-seated instincts. He has to reverse what you might call his natural impulses. It is absolutely wrong to gamble in stocks the way the average man does. Instead of hoping he must fear; instead of fearing he must hope.

He must fear that his loss may develop into a much bigger loss, and hope that his profit may become a bigger profit.

Let’s apply this to where we are right now in the market today.  We can choose to either hope or to fear.  Instead of fearing I am choosing to be hopeful that we have very prosperous days to come.  

I am choosing to feel this way, however most people are fearful things will get worse.  I cannot count the times I have heard the statement, “we have not seen the worst of this.”  This is a fearful statement and in fearful times it is imperative to fight this feeling and remain hopeful.  One point in history to consider is that from July 1932 to March 1937, in times when there were bread lines and the economy was on the brink of failure, the stock market increased approximately 366%.  I’m sure there was quite a lot of fear and not much hope at that time.  

This is quite a dramatic situation but in our current market environment one which is being so closely correlated to the 1930’s it is a situation we need to keep in perspective.