Do you know what happens to your portfolios when the markets goes down? You lose money, banana brain. My stocks and “picks”, as you like to call them, have done poorly this week. Do you know why they did poorly? BECAUSE THE MARKET WENT DOWN, banana brain.
Am I supposed to curl up in the tub and cry myself until I drown? Or, perhaps I should ready myself for St. Patrick’s Day festivities tomorrow, hosted by yours truly, with a sincere intent to get inebriated?
Once again, for the new readers on the site, I will have to demonstrate how this works and what is going to transpire.
Because I own, what people like to call, “high beta stocks”, my drawdowns will probably outpace the general indices. The SPY was down less than 0.3% today, yet I shed another 1.5%. Naturally, whenever the market decides to bounce, my stocks will do better. So it’s important to do two things now:
1. Stay in the game.
2. Position myself for success.
Staying in the game means that I should prepare for worst case scenarios, stress test my portfolios to see if I could withstand a serious market drop. Leverage should be reduced, if not eliminated, and holdings should be diverse.
In order to position myself for success, it is imperative that I establish exit strategies for my losers. This entails a very specific and methodical labeling of my holdings. If XYZ drops by 10%, do I cut the loss or buy more? How low should I let XYZ go, before averaging down? Should I buy XYC into what looks like an upside reversal or continue to buy the dips, in 3,5 or 10% intervals.
The goal is to keep average cost in line with current prices. In the case of FEYE, since I bought it today above $80, I have no choice but to either sell the whole thing if it trades lower, or buy more. It would be foolish for me to do nothing and wait around for my cost basis to be realized, especially since I have 10% of cash on hand and another 50% or so in buying power.
I intend to stretch my buying power to the extremes, by managing my current positions, then letting go of some of them on the next bounce, like a god damned harpoon thrusting into a retarded whale, spastically galavanting about the sea.
The PPT will be my guide.
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