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Why am I still holding BEARX even though it is down 50%? Good
question <g>!
When I originally entered it in 1996, I knew a lot less than I do
now. At that time, I brought into the belief that the market was
over valued and would correct to "normal" levels in the relatively
near future. After buying into BEARX, it actually went positive for
a short time about 6 weeks later. I saw this as the harbinger of the
future <sucker>. It was only mildly positive, so I decided to hold
on for further gains, buying into David Tice's web.
Shortly thereafter, BEARX went negative. I again brought the spiel
and was confident that patience would be rewarded in 1997. After
all, years ending in 7 were not generally good for the market, nor
was the first year of a presidental cycle. During the summer of 1997
(if I remember correctly) BEARX again went positve for a brief time.
I seriously considered selling out at that point but hesitated too
long. In a relatively short period of time, we were negative again,
sharply so. At that time, I had spare cash, so I decided to hold out
and definetly get out at the next positive opportunity.
But the fund has never been positive again since 1997, mostly
hovering around 45-60% negative. I've kicked myself many times for
not getting out in 1997 but that's life and I don't think I will
repeat such a mistake again.
At such steep loses, I have mentally written off the asset. So
holding on to hope that Tice will learn what to do doesn't cost me
much in terms of mental health.
One lesson for all is that this experience may be similar to how the
general public feels about their now declining net investments. Many
people that I talk to are down large percentages but are resolved to
hold on, refusing to sell at any price because they are confident
that the market and their stock will come back. After all, that's
what CNBC and most of the guests say will happen, right? The market
ALWAYS comes back. Few recognize that it could take 10 year sor more
for that to come true though. This refusal to accept defeat will
probably mean that when the real decline comes, it will be worse than
expected. I fully expect the NASDAQ to visit 1000 before it sees
5000 again. Maybe BEARX will be positive then <g>, although with
David Tice running the fund, I fear that the NASDAQ may have to go to
zero for BEARX to get positive, sigh...
--- In realtraders@xxxxxxxxxxx, mike <combat@xxxx> wrote:
>
> Someone raised a very interesting question - why would people
continue
> to hold substantial assets with a bear fund that is down 50% in the
past
> five years? A few possible explanations:
>
> 1) The supposed negative correlation of such funds theoretically
should
> reduce overall portfolio volatility, although who cares about
volatility
> when you're down 50%?
>
> 2) Some investors are contrarian by nature and don't want to admit
being
> "wrong", which is the greatest curse for a trader.
>
> When 25 year old Matt Berger was promoting his Manhattan Hedge Fund
> during the 1990s with the professed strategy that he would be
shorting a
> lot of the high flying New Economy stocks, he ended up having to
> generate false return reports because he was (not surprisingly)
getting
> hammered. The Nasdaq was up 85%+ last year, and he was reporting a
> positive return, and his investors BELIEVED HIM.
>
> Why would they do that? Because they wanted to maintain faith in
one of
> the great pillars of American thought: that it is possible to make
great
> profits by bucking the trend, and when the public is the most
bullish,
> that is when the most money may be made.
>
> Unfortunately, trends do occur, even in the Nasdaq, and the market
will
> make people pay the full price for their stubborness.
>
> Just my two cents.
>
> Michael Strupp
> Now appearing at the University of Chicago!
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