T.G.I.F. — Thank God it’s February. At least that’s what most long-term investors were thinking after an abysmal January. Abysmal might be too soft a word. The Dow Jones, down 8.8 percent, and the S&P 500, down 8.6 percent, had their worst monthly start of the year EVER. Sounds like there’s some Bears that need Taming.

And yet, it didn’t feel like it. There was no panic. It was rather orderly, if that’s even possible in a ‘worst ever’ month. Perhaps for market investors, it rings true that the opposite of love isn’t hate, it’s “I don’t care!”. There was no cathartic (market) puke, or purge. You know, like the day after the night your friends feed you ten too many JagrBombs.

Typically, and historically, high velocity declines can represent some form of buying opportunity, depending on one’s risk profile, time, and horizon. A cleansing represents just that. It gets rid of the “last holders on”. The market literally divorces itself of those who have been most married to a (wrong) opinion. Attachment, to an outmoded opinion, belief, or idea, as in life, does not work in the market.

Markets of all nature vacillate between fear and greed. Although this is oversimplified, it pays a trader/investor to buy fear and panic, and sell greed and manic.

A classic bear market, and one like this, is one that feels like ‘death by a thousand paper cuts’, one that just wears on your psyche. That’s why they created vodka, …er, I mean, meditation, and a site like Tame The Bear.

What is required is patience, capital preservation, debt reduction. To get through this, one must go through this, and this, too, over time, shall pass. I will share much more on that vibe in the future.

“In a market like this, every story is a positive one. Any news is good news. It’s pretty much taken for granted now that the market is going to go up.”

- Wall Street Journal, 8/26/87, the day after the 1987 market peak

Sell. (greed, hubris, mania)

That blurb was printed less than 2 months before the famous 1987 stock market crash.

Oftentimes it pays to fade conventional wisdom, which is not to be confused with putting a poster of the latest boy band on your wall, just because your male friends aren’t.

An example of “fading conventional wisdom”?

What I’m referring to is more exemplified in considering the case of Martha Stewart.

She was sentenced to serve 5 months of prison time for insider trading.

The sentence began in October 2004. Of note, is that the stock price of Martha Stewart Omnimedia (MSO) went from the mid-teens to about 8 bucks during the time of uncertainty (when she was at trial). The day the sentence was announced the stock popped to 11 bucks, and never looked back. 5 months later, on the day she was released, the stock was at 36 and hasn’t seen those levels since. It’s currently at 2 and change.

To recap: Martha goes to jail (MSO at 12-ish). Soccer Moms everywhere, getting emotional at the sight of Martha doing the Perp Walk, are worried that they won’t be able to duplicate last Thanksgivings’ pumpkin pie recipe without Martha’ guidance, and that Martha Stewart Entrerprises is doomed forever. So, they sell their stock.

Buy. (Fear)

Five months later, a time in which the stock has climbed 200 percent, CNBC is literally interviewing Soccer Moms, who say they will buy the stock now that Martha is out of jail. Wrong.

Sell. (Mania, Elation, Hope)

An old axiom is to buy the rumor, sell the news (and vice-versa).

Why do I bring this up? Because the box of wine is starting to kick in, and I am blessed with massive A.D.D…. metaphorically speaking of course.

Seriously though, while I feel laughter is food for the soul, and the satire at Tame The Bear is a necessary tonic to a lot of the crap that pervades the system right now, it behooves us also to figure out how to move forward, how to empower ourselves to be able to be part of a new era of personal responsibility AND community.

In order to do this, from time to time, I will introduce some simple mechanics in a rolling effort to show how we got here, and to possibly better view and, in effect, change where we might be going.

And if that doesn’t work, and the apocalypse is truly upon us, there’s always Vodka, ….er, I mean meditation.

Tags: economy, investing, opinion, stocks