Patience Isn't Always a Virtue

When you buy at the top you get to feel like an idiot for a very long time

Thought you might like to see this chart that caught my eye this morning. It’s purpose is to remind us that buying stock at the time when everyone is telling you to buy stock is exactly the wrong time to do it. Or, as Pascal observed, ‘All of humanity's problems stem from man's inability to sit quietly in a room alone. Investing is not a social activity; it is not supposed to be fun. It is deadly serious work.

On Friday, a hedge fund manager you had never heard of who lives far away didn’t couldn’t make a margin call. His banks forced the sale of more than $20,000,000,000 of stocks in just a few names, driving their prices down by 27% in a heartbeat. This morning we learned that at least two big banks, Nomura and Credit Suisse, will suffer material losses as a result. Financial stocks dropped sharply this morning. One guy, a few stocks, just two banks. Think about it.

Events like these are ‘markers' that a market is primed for a big problem. They have been popping up more frequently in recent weeks. Pay attention.

Dr. John