An Open Letter to the Bears

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An Open Letter to the Bears

1 October 2008, 8:15 am
by Carlfutia.com

Folks:

Well, the averages are down nearly 30% from the highs they reached last October. Congratulations on your foresight!

Now what? I know that most of you are expecting prices to move a lot lower. The most optimistic bearish projection I have heard is 1050, but most are looking for a move below 1000 in the S&P.

I have a question for you. Suppose the market does get to 1050, 1000, 950, ..... What will you do then? Will you step in and buy when the S&P hits 950? At this point in time you may think you will, but you are forgetting that if the market hits 950 the financial system and the economy will look a lot worse then than it does now. The news will be really scary. Are you sure you will have the courage to go long in the face of such bad news? Remember, you don't want to buy now at S&P 1150 because you think the bad news we are reading in the papers means the market is going much lower. What will change when the market hits 950 to give you the courage to get long again?

Do you have a plan B? Suppose the market doesn't hit 950. In fact suppose, just for the sake of argument, that it makes its low at 1100 and three months later is selling at 1300 on its way to 1600. What will you do then?

Remember, you can only reap the benefits of the foresight you have shown so far by getting reinvested at a price lower than the one you sold at. Why are you confident that you will be able to do this?

(signed)

The Village Idiot

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