When The Going Gets
Tough, The Tough Go Fishin'
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By: Karim Rahemtulla
Investment Director
Smart Profits Report
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Published:
September 15, 2008
As I was tracking the stock market
on Monday, September 8th, one particular stock caught my attention
-- big-time.
Shares of this well-known company began the day over $12,
plunged to $3, and ended the day just under $11.
Talk about one heck of a turbulent ride (and that should give
you a clue as to the stock I'm referring to here). Some folks
made a LOT of money, while others lost a boatload.
The question is: How do you ensure that you're on the right side
of the equation when the you-know-what hits the fan?
The Rise Of The Machines
In my 20-plus years in the financial and investment business,
the stock market is arguably behaving more irrationally now than
at any other time. What's more, it's not just a quick bit of
volatility here and there... the turbulence is occurring over a
sustained period of time.
Why? What should we attribute this volatility to? The economy?
Energy prices? Inflation? Higher unemployment? The government
takeover of Fannie and Freddie? How about the war in Iraq? The
close political race for the White House?
These are all factors, for sure. If there's one thing investors
hate, it's uncertainty.
But there's another reason for this unparalleled level of
skittishness. A new component that was non-existent in its
current form just 10 years ago. Something so ubiquitous that we
just don't give enough credit for in making this period amongst
the most volatile ever.
Yes, my friend -- the machines have finally turned against us,
and we don't even know it.
When Going Online Can Put You Off Kilter
It's the Internet.
Plain and simple, this one life-changing technology has changed
the way we invest. It's the single most effective means of
global communication today -- a medium we use to invest and make
split-second, broker-less decisions from our laptops from
anywhere in the world.
The Internet is a hub of information -- for news, sports, music
--
and investing decisions. We treat the Internet as a news source,
regardless of whether the news is accurate. If it's online, or
if we get it from a Google search, it has to be true. There is
no due diligence allowed, no time to find out what the real news
is -- not when everyone has access to the same information. And
if the whole crowd is wrong, heck -- better to be wrong with them,
just in case they're right. Right?
Wrong. It's twisted logic. And it's what caused that stock I
mentioned a moment ago to plunge -70% before recovering over +200%
in just one eight-hour period.
A Bumpy Ride For United... Courtesy Of A Wacky Web
Last Monday, trading in shares of UAL Corporation (Nasdaq: UAUA),
the parent company of United Airlines, were temporarily
suspended when the stock plunged.
The drop occurred because a news story from a very credible
source -- the website of the Florida Sun Sentinel
newspaper (owned by the venerable Tribune Company (NYSE: TXA))
-- mentioned
that the airline was considering bankruptcy.
An hour after the market opened, the shares began to plunge... at
the exact time the story began to make its rounds. The fall
gathered momentum on the source's credibility -- it's not like it
was just some blog site run by unhappy union employees trying to
send a message to management, or from a short-seller wanting to
spread rumors.
But it was totally bogus.
The story was first published in 2002 -- when United WAS
considering bankruptcy -- and was buried deep in the archives of
the newspaper's online site.
But that single click on the archived article all of a sudden
made it a "live," present day story (I still don't
understand how that happened) -- and as soon as it made it to the "live"
world, investors panicked and sold the shares.
The company swiftly refuted the story and the shares recovered
--
but the gains for some and losses for others were in the
hundreds of millions of dollars. This is NOT the way to invest.
On the other hand, here's a much better way...
Don't Look For A Bogus Truth... Just "Go Fishin"
The instability and volatility of today's stock market is aided
and abetted by investors turning to flimsy sources like blogs
and message boards to find the "truth" when there is no other
explanation.
More often than not, however, this truth is a concocted story,
or an opinion disguised as truth. The answer may be wrong, but
it's an answer nonetheless, and investors are always seeking
answers to explain what they cannot. In essence, it turns into
any answer potentially being the right one. Is this the kind of
basis on which you want to risk your hard-earned money? Not in a
million years.
A better solution comes courtesy of my good friend and colleague
Alex Green, whose long-awaited book, The Gone Fishin'
Portfolio, has blasted its way up the rankings on popular
sites like Amazon.com and Barnes & Noble.
In it, he discusses his extremely successful investment
philosophy and the simple, yet effective, techniques for making
AND keeping the money that you make.
His observations and advice come from years as a Wall Street
money manager and as the guiding force behind The Oxford
Club's phenomenal investment advisory.
Simply put, it's the very antidote that you should look to
during times like this. It's grounded, logical, and based on the
sound investment philosophy that has proven itself in all market
conditions -- even those like we're experiencing today.
So do yourself a favor and use the Internet for something that
you should use it for!
Click here for more information.
About Karim Rahemtulla
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