June 27th, 2008 by Potato

Another nasty day on the stock market today, and a new-found 52-week low for the Dow. Back in January/February I was buying up “values” like crazy on dips like this, but these days I’m finding it harder to stay positive that the end of the bleeding is near, and that things might at least stabilize even if not turn bullish in the near future. After watching “A Crude Awakening” I’m even worried that we might truly be on the cusp of the Second Great Depression. That despair itself might help indicate a market bottom, but since I only have a bit of “dry powder” cash left I think I might be sitting out any more buying for a few weeks or months until I see a real gem.

It was an added psychological blow today when I saw that my capital for the year to date was down over 10%. The real story is not quite that bad, as distributions and dividends have made my overall return a less than 5% loss — beating the S&P500 and the Dow for these 6 months, but not the TSX. Unfortunately, my worst two performers were my most recent buys and the two companies that I thought I snatched up at real bargain prices: GE and Yellow Pages (each down about 20%). I am tempted to be greedy and dollar-cost average or “double down” into either one at this point, but am having real trouble trusting my value-trap avoidance senses, especially after how they’ve performed in the last 2 months. I could be really greedy if I thought that this was the market bottom (or close enough to it) and get some leveraging going, which has been something I’ve avoided as being outside my risk comfort zone.

A guy I used to work for is a big believer in the power of leveraging to multiply returns. Unfortunately, today’s market downturn triggered a margin call for him and that is a very unfortunate, very painful situation to be in. He still thinks that I should maybe look into getting a 5-10% leverage… but is now suggesting that I wait a few months before taking that plunge.

Anyhow, Netbug asked in a recent comment about how to get into the stock market in the first place, so maybe in a few days I’ll do up a post on that, though I’ll probably talk to him via other channels directly, and let that experience guide me in setting up a template (plus it’ll give me a chance to search the other personal finance blogs, as I’m sure CC or MDJ has a post of that sort in their archives.

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