I grew up in a stock exchange oriented house. The family owned a large furniture business and they floated a company on the exchange. I don’t remember much of those days but there were always uncles and older cousins in deep discussions about the ‘market.’ I think I thought they were into vegetables. One day grandfather patiently explained what it was all about. The part of his talk I remember to this day was when he said “I will never disappoint my shareholders. As soon as the shares drop below their issue price, I buy them to keep the price up.” That made sense to me and opened all sorts of possibilities.

I was in business

I found a friend whose father was a broker and allowed his son to ‘dabble’ and I was in business. Whenever I saw the price dip below the datum level, I would hastily borrow all the money I could lay my hands on – Payday Loans and Personal Loans weren’t in business in those days – and buy shares through my friend. I had to pay him off, of course, but as soon as grandfather moved in to correct things, I made enough money for everyone.

Things change

Then grandfather departed and things changed. But I was hooked on the exchange and started reading the papers and looking for clues and tips. I also started looking at things around me and thinking that they influenced the market. For instance I counted the number of cars passing through an intersection on one light change: if the number exceeded 100, it means that the auto industry was up – buy GM or Ford. If there were many skips and cranes in town it meant the building industry was up and I bought shares in the construction sector.

More pointers

If the stores in the mall were full of women buying clothes, then I bought clothing shares; no shoppers, sell the shares. There is a quite well-known indicator – the ‘lipstick indicator.’ This is a theory that says that even when feeling gloomy or economizing on the big-budget spending, it’s still possible to get a little psychological lift at a modest price by buying a tube of lipstick. It is the net effect of replacing big indulgences with small luxuries is an overall contraction in total spending, i.e. the lipstick indicator is predicting a recession. Lipstick sales reportedly soared following the attack on the World Trade Centre.

Does my system work?

When I am playing on a rising market, it works, as does every other system. On a falling market it fails and I lose. But I have a lot of fun. I’ll stand at an intersection counting the cars like a farmer counting his sheep going through a gate, rush home, get into the broker’s website and give the instruction with a great sense of urgency as though I have been tipped off by the ‘Master of the Market’ himself. An hour later when I see the stock going in the other direction I will curse myself for being stupid and acting like a child.

It’s not all like that. Sometimes I will sit clapping my hands for being a stock market guru able to predict anything, as I watch the stock going exactly where I thought it would go.

All in all it’s a bit of harmless fun, the amounts are small and it’s probably a lot safer that gambling online.

This one is global. It’s everywhere and it’s hurting everyone. Whole countries are bleeding and the consumers in those countries are hemorrhaging.

• Job losses are mounting
• House prices are falling
• Stock markets are falling
• Pension funds are falling
• Savings rates are falling

It’s like watching a dead duck spiraling downward.

In this recession,

• analysts,
• economists,
• government,
• policy-makers,
• housewives,
• journalists and
• publicans

cannot agree on how this will all pan out, or when it will end. In other words – nobody knows.

So what’s going to happen?

I look at my miserable share portfolio and grieve over the loss. It’s worth about half of what it was before the bomb fell. I get all excited when it rises a few dollars by the end of trading. But I’m still losing half of my money. What’s to get excited about? It may take years or even decades, for my portfolio to return to its old value. Am I going to sit here every evening and mourn over my losses? The stock market will languish for years.

Okay, so recovery will start next year as everyone predicts but all it will do is nibble away at my losses. Who can wait that long?

Maybe this is the time to buy?

Perhaps I should be brave, sell at the present ridiculous prices and start playing the market again at the new low levels. The problem for a Sunday afternoon stock market player is that it’s hard to swallow a loss. I’m in the habit of selling only when I’m making a profit. That was a great strategy on a rising market; what’s the game on a falling market? And the experts tell us that to be a successful stock market investor you need to take a leap of faith. The time to buy shares is when the news is bad, the economy is struggling, and there are no lights at the end of the tunnel. It’s when shares are at their cheapest.

What do the successful investors do?

Successful investors have faith in the market and in themselves. They do not make the mistake of buying high and selling low. If I decide to wait for the shares to drop even lower before I buy, how will I know when the market bottoms out? I could sit here for years watching the market drop and when it gets really low, I’ll still be sitting on the sidelines waiting for it to go even lower.

Maybe this is the time to get out?

Perhaps it’s time to bite the bullet and quit. I’m sure that all financial news that is still coming in the near future is going to be negative. There will be more uncertainty than ever, and therefore more reasons than ever to not invest in the stock market.