Losers, Winners, and Stops
Investment Research for Online Investors

by John Dalt

02/13/09

If you have not received our letters every day, you can read any missed issues here. They are listed with a short quote in ascending order of publication. MarketWatch articles are also accessible from the home page on the left side, just click on the ones you would like to read. We have had trouble with our email service for the last 8 days; I think all problems are now worked out. Make sure you put us in your address book as safe so your filter does not block our letter. We do not spam, sell or loan your email name to anyone. I will not give your name or email address to anyone without a court order! 

I received a copy of an article written by the London Daily Mail’s Peter Hitchens.  Some might think it repetitive, but I think it is worth your time, you can read it here.  It is refreshing to read someone who understands and appreciates America’s exceptionalism.

I am always torn on whether to add to a losing or winning position.  The easy decision is to add to a loser, this verifies our ego that we made the right decision in the first place.  We say to ourselves “The market will realize I was right, this stock will go back up, and I will make even more money.”  This is hopeful thinking, and I am guilty of it.  Hope is not a trading strategy.  It has occasionally worked out, but many times more money is committed, time goes by, and eventual capitulation to the market’s harsh judgment.  Adding to a winner is harder for me to do.  If I catch a stock on a nice run, the tendency is to wish for larger position, to make up for the last loss.  When I have done this, inevitably the market reverses and wipes out the gain I had on the original position.  I think the discipline of selling losers immediately with a trailing stop and going to the next opportunity is the best strategy.  This maintains our capital and lets us play another day.  In today’s market, that is the most important place we can be. 

While watching the speeches from the hallowed halls of congress, I read about Norman M. Thomas the Socialist Candidate for President in 1928  You may not remember him, he was one of the founders of the American Civil Liberties Bureau, renamed the ACLU.  He was defeated but lived to see FDR do his bidding.  It is amazing how long the legs can be on bad ideas.  Hopefully after our ‘Dear Leader’ leaves the country will be able to shake off some of the socialist programs he is initiating and funding.  It will be difficult; we need another inspirational leader like Ronald Reagan.  Who will it be?  I liked Huckabee, because he is likable and his history as a minister made him quick with a quip.  Who do you think will our next President?  Share with us with your reasoning at feedback@galtstock.com 

The market will be closed Monday, so there will be no letter, I will be back Tuesday.  I have to do my taxes this weekend. 

The information presented in this newsletter is based on generally available news releases, corporate filings, current events, interviews and the editor’s opinions.  It may contain errors and you should not make investment decisions based solely on what you believe you have read here.  Do your own research, it is your money.  If you lose it, it is your responsibility, not ours or your grandmothers!  The editor may or may not have a position in any securities discussed.  The editor may have held a position in a security earlier, or in the future.

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