Thursday, September 30, 2010

Penultimate Preparedness

I continue quoting Peter Lynch's "One Up On Wall Street":

"No matter how we arrive at the latest financial conclusion, we always seem to be preparing ourselves for the last thing that's happened as opposed to what's going to happen next. This 'penultimate preparedness' is our way of making up for the fact that we didn't see the last thing coming along in the first place."

Greed on the way up, fear on the way down. Both are contageous. That is why we always miss the turn of the tide.

"The day after the market crashed on October 19, people begin to worry that the market was going to crash." [he refers to 1987 Black Monday]

"Those who got out of the market to ensure that they wouldn't be fooled next time as they had been the last time were fooled again as the market went up."

His point eventually is in the book... you should not try to time the market because you can't. No one can. I know I have tried. Sometimes almost correct, many times not at all. It's like tossing coin. You may get enough success to think you can do it and then you get really wiped out. And I totally agree on the penultimate preparedness. That leads to excellent buying opportunities as was the case in early 2009. Both crashes and bull markets will always be overdone. Always have been and always will be.

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