The often used term “fiscal cliff” has been bantered about as the main reason that the stock market has been in decline since before the November elections. The so-called “fiscal cliff” is a dramatic reference to the potential federal spending cuts and tax increases that would take place on January 1, 2013 if legislation wasn’t enacted by the government to avert it.
To what purpose would Wall Street and the “Smart Money” crowd use the “fiscal cliff” mantra? It seems quite evident that it motivates the distracted and unwary to sell their investment holdings at lower prices. As fear replaces reason, the emotionally vulnerable investor panics and dumps their stocks.
We need to ask ourselves, “Who’s buying what they’re selling?” Perhaps the buyers include those who faithfully follow the example of one of history’s greatest investors, Warren Buffett, who said plainly, “Be fearful when everyone is greedy, and greedy when everyone if fearful”.
What Mr. Buffett meant in essence is, “When the stock market is reaching lofty highs and everyone is a buyer, that’s when it’s time to mind your trailing stop orders and even tighten up those stops. When the investing public is frightened and focused on media-contrived drama like a fiscal cliff, that’s the time to be a careful and patient buyer. “
It’s also a chance to pay attention to the price alerts you set for yourself to receive when the stocks you want to buy become “bargains”. Trailing stop alerts and price alerts are just two of the benefits of using TradeStops 2.0.
Fears of an imagined “fiscal cliff” and the gut-wrenching recession that it would cause are refuted by the “hard facts” that investors ignore at their own peril. The acclaimed editor of Retirement Millionaire, Dr. David Eifrig recently wrote about the irrational notion that looming threats like the “fiscal cliff” makes American stocks a bad bet.
Dr. Eifrig stated, “My advice is to buy American. I think the “doom and gloom” analysts are wrong. And the world’s most successful investor, Warren Buffett, agrees with me.”
Every investor and trader wants to “sell high and buy low”, but few have the discipline or the tools to do it. That’s why utilizing TradeStops 2.0 is so powerful and effective. It gives us a reliable way to create an exit strategy BEFORE the next big stock market correction begins. This way we’ll have the money to buy whenever all the “Terrified Toms” are selling.
Today a colleague sent me this admonition, “While many factors suggest that a short-term deal to avoid the fiscal cliff will emerge, investors should remain cautious until Christmas. It’s an unwelcome message, and may seem bogus if you’re confident that a lapse of the Bush tax cuts or across-the-board spending cuts will be temporary, perhaps followed by a rally worthy deal.” I yawned and set more trailing stops.
Looking back at similar cliff-hangers in the investment markets like the summer and fall of 2011, there were always excuses and media script that tempted investors to think, “The sky is falling”! Those who use stealthily placed trailing stops using TradeStops and who responded to the alerts they received, have the cash to buy towards the bottom of those buying opportunities and reap handsome rewards.