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After a bubble comes the reality check…

Four passages from Yahoo Finance stating that after the close:

Stocks wrapped up a brutal September with a sell-off on Monday, dragging the Standard & Poor’s 500 and the blue-chip Dow to their worst quarter since the crash of 1987, as familiar worries over the U.S. economy and corporate profits drained investor confidence.

TurtleTrader comment: What is investor confidence based on to begin with? Is it the same thing that drove the equity bubble up too?

People are tremendously disillusioned with the current news, and they don’t see any real catalyst for upside going forward, said Philip Dow, director of equity strategy at RBC Dain Rauscher. It’s a very difficult time.

TurtleTrader comment: If it is so difficult why is Dunn Capital up +50% for the year? You mean it is difficult if you have no strategy or plan?

“The mood is pretty bad out there”,

said Thomas Garcia, who helps manage $2.5 billion in equities at Thornburg Investment Management Co. People are expecting the worst, and there’s some uncertainty out there … on what earnings are going to be in October.

TurtleTrader comment: How do earnings or no earnings in October tell you when to buy or sell or how much to buy or sell?

Speculation mounted that the Federal Reserve would cut interest rates yet again to prop up the anemic economy, as fresh data showed manufacturing in the Midwest shrank for the first time in eight months in September. This was the latest in a string of reports raising worries the frail economy will crimp corporate profits.

TurtleTrader comment: Even if you had a crystal ball and could read what corporate profits may be…how does that help to trade?

Mutual Fund Buy & Hold Nightmares

Table provided by Lipper (Assets in billions, based on largest class share. Data through 9/27/02):

Fidelity Magellan $60.2 -15.0 -27.8
Vanguard 500; Inv $58.3 -16.0 -27.1
Investment Co. of Am; A $47.9 -13.6 -19.8
Washington Mutual Inv; A $44.4 -16.0 -20.3
Growth Fund of America; A $30.6 -12.3 -25.9
SPDR Trust $30.5 -16.0 -27.1
Fidelity Contrafund $28.7 -9.1 -9.9
Fidelity Growth & Income $28.1 -13.2 -21.6
Euro Pacific Growth; A $23.6 -16.6 -18.9

Is it possible that these billions in losses were really just the result of buy and hold (hope)? You better believe it! There are three possible choices: invest with a trend follower, do it yourself becoming a trend follower, or sit there and see how low your buy and hold mutual fund can really go.

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