2008 - A Year to Forget
2008 was a year to forget for most investors and traders.
If we were all geniuses we would have sold everything in April and then
shorted everything! But being human beings that obviously wasn't possible!
There were so many shocks this year: oil prices soaring to $150 a barrel and
then sinking to below $40. The banks had a torrid time needing bailouts and
mergers as the sub prime problems exploded.
There were also exploding hedge funds and interest rates dived across the
world in a desperate attempt by governments to get us spending.
And of course the main thing was a complete collapse in confidence by the
financial markets, traders and investors.
Many who'd been trading on big margin suddenly found they were getting
called and asked for big sums of money which they didn't have.
When is it all going to change?
I hope next year is going to be an excellent one. My main hope is to be able
to buy some shares near the bottom, relax and just hold onto them for
months. Markets rally well before a recession is over and I'm sure you, like me,
hope sentiment changes and the recession won't be as bad as feared. If that
proves to be the case 2009 could be fantastic.
I'd expect the first part of the year to remain difficult but I wouldn't be
surprised to see some green shoots appearing by the spring and a monster
rally by the autumn. Well, that's what I'm hoping for!
With interest rates at close to zero, dividends really come into play and it
might be worth owning stocks paying around 5%.
In 2008 I didn't get out of some of my shares fast enough.
What I'm glad about is that I managed to make some decent sums shorting
companies and I searched for companies with big debt. In hindsight of course I
should have shorted and held onto the shorts for much bigger profits. I did
tend to take profits on shorts too early.
However Travis Perkins yielded my best profits shorting it all the way from
900 odd down to 300. Next also yielded some good gains as did Rightmove which
I shorted for most of the year down from 500 odd to 250. When I cashed in
the last short the spreadbet company said I couldn't short it anymore because
they couldn't "borrow stock" - curses! Else I'd have made even more out if it.
FTSE shorts yielded some good gains too: more luck than skill here but in
the end it was a bear market so really it wasn't that difficult and I simply
tried to short the index after rallies. Which worked. Again, it would have been
better if I had just held onto these shorts instead of taking profits
especially when I was shorting it in the 6000s. I suppose maybe I'm a bit scared of
holding shorts for long thinking I'd get blown away by a big rally. The usual
fear thing I guess.
I made some really good gains on oils and oil services before they collapsed
- while I didn't manage to get out right at the top I got out with profits
and balls intact! The best was probably Wellstream which I traded up from
its float in the mid 300s and traded it along the way to the 1000 plus area
where I eventually sold out completely.
I also had some stinkers. Everyone has them. If you come across anyone who
tells you they make money on every trade, treat their claims with a pinch of
salt - it is just not possible.
The main reason I had some stinkers was because I made the mistakes I sound
off about in the book - ignoring stop losses and averaging down. I think all
us investors however experienced will make this sort of error most years.
Just human nature.
Generally though losses were kept to a reasonable level and I didn't take
too many losses over £1,000. In the end in the main sticking with stop losses
worked well this year and taking lots of smaller losses ensured my capital
stayed intact. I think I probably overtraded a bit and next year I'm going to
try and relax a bit more and not make so many trades.
I wish all of you investors and traders the best of luck for next year. For
the moment I'm going to carry on keeping stakes low and stops tight. Keeping
some cash on the sidelines is essential.
What's always amazing is how sentiment can change so quickly. However one
thing I hope not to do is chase too much with big stakes for fear of missing
the bottom. Once a new bull market starts there will be tons of opportunities
even if the bottom has been missed.
I wish you all the best in the markets for 2009 and will be back again here
in the new year. Seasons Greetings and a Happy New Year!