Getting Itchy?

Suddenly, I’m an investment god.

Members of my free email list have spared no time with the thesaurus to dream up adulations for my recent calls on Sun Microsystems. “Skillful,” one called me. “Masterful,” wrote another. But my favorite has to be that old standby from my curtain-climbing days: “crackerjack”. You remember, when you’re really good they call you…

However much I’d like to print those emails and enlarge them for wallpapering my office, I must demur. It’s true that I have called with near perfection the major highs and lows of SUNW for the past two years. It’s true that in the most recent cycle I suggested buying last October at about $3.50 and then suggested selling in January and February for prices between $5.50 and $5.85. My stated plan in the Feb. 15th post was to buy again at prices below $4 over the summer. Shortly after that post, the email thermometer read cold, cold, cold as readers told me that my own system of revisiting prices three months after major moves would show me that I’d been early. Yet, here we are a mere six weeks later and the price of Sun Microsystems closed last Friday at $4.11, and even dipped below $4 on Wednesday.

Why, then, do I demur? Because this drop happened much more quickly than I expected. Further, I’ve researched investing, written about investing, and managed my own portfolio for long enough to know that skill and luck wear the same clothes and are frequently mistaken for each other. In this case, I believe my analysis of Sun was correct. However, a large part of this recent sell-off has had nothing to do with the company but a lot to do with changing winds in the market. The timing of that was luck, not skill on my part. I’d make a lousy politician, wouldn’t I?

The emails this week centered around Sun crossing the $4 threshold. “Is it time to buy again?” asked one faithful reader. “You’ve been right every other time, so I expect you to be right again. Tell me when to buy and the order is placed.” Such pressure. Luckily, it’s not new to me. Rather than speculate on what you should do with your money, I’ve always slept better simply reporting what I’m doing with mine.

So here it is: I haven’t bought again yet and I have no limit orders in place.

Would it be unwise to begin accumulating shares at $4? Probably not. I can think of worse places to put your money these days.

Herewith a rundown of my standard answer to fresh wordings of standard questions:

Will we have a big summer sell-off? Beats me.

Will the market rise because this is an election year and President Bush doesn’t want disgruntled investors voting him out of office? Beats me.

Would John Kerry be better for our portfolios? Beats me.

Is there anybody who has consistently timed the market? No.

Will my mutual funds be able to protect against a downdraft? No.

Has the new world of terror changed the way I should invest? No. There never is a new world and nothing should ever change the way you invest. That idea is a brainchild of the financial press because “What you should do now” sells a lot more magazines and newspapers than “Same old same old”. As an aside, the world is not as bad off as some people think. If the principles of investing held up through the Great Depression, World War II, and the Vietnam War, they’ll hold up through the War on Terror. The world has always been a rough n’ tumble place.

Just what are the principles of investing that always work? Why, I thought you’d never ask. I’ve conveniently summarized them for you in this book.

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