The Mindset for 2009

The object of a New Year is not that we should have a new year. It is that we should have a new soul.
-- G.K. Chesterton

New Year's Day is just an arbitrary starting point, but it can have a great positive psychological impact if we spend a little time reflecting on changes we want to make. First and foremost it is mental adjustment that we need to focus on. Everything else will flow from there. The way we act, the actions we take and the way we approach the market will all flow from our mindset.

The most important mindset for investors to cultivate as we enter 2009 is one of flexibility. We probably all have at least some vague feelings about how the year will play out. Some folks go far beyond that and have very strong beliefs one way or the other about our prospects.

I try very hard to avoid the prediction game. The only thing I know for sure about 2009 is that there are going to be some very good rallies and some very ugly disappointment. My goal is to simply navigate it the best I can, provide some helpful insights and make some money. It would be easier if we just had a slow, steady bull market that lasts for most of the year, but I'm fairly certain that is not going to happen quickly or easily.

So let's start off the new year with the right mindset. Let others be hopefully optimistic bulls or doom-and-gloom bears -- we will just be open-minded and see how it goes.

The good news is that the major indices have been holding in pretty good-looking trading range for about six weeks now. There is support, and I'm seeing some improvement in individual charts. The bulls have been trying to turn things up and did manage some upside in the last couple days of 2008. We still have positive seasonality to help the cause, but the highs of December are our first technical hurdle.

The big negative out there is that we really don't have much good news to excite buyers. Some are hopeful we have already anticipated the worst and priced it in, but the economic news and the popular press is just downright gloomy. We do have the Obama inauguration fast approaching, and that is likely to stir up some hope. We'll probably have a honeymoon period, but reality is likely to set in quickly and we'll have to be very careful about being sucked into unrealistic expectations.

Trading today is likely to be quite thin as many folks don't return to work until Monday. That may favor the bulls a bit, especially on this open, but there was obviously a lot of end-of-the-year moves made, and those are likely to be unwound to some degree over the next few days. On the other hand, new money tends to flow in to start the new year, and that can help provide some positive seasonality.

I'm looking at "'fading" -- i.e., selling -- some early strength, but I'm not going to be very aggressive until things settle down a bit.

Welcome to 2009. Good luck and go get 'em.

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James "Rev Shark" DePorre is the author of Invest Like a Shark: How a Deaf Guy with No Job and Limited Capital made a Fortune Investing in the Stock Market. He is founder and CEO of Shark Asset Management, an investment management firm, and he also operates sharkinvesting.com, an interactive online community that serves and educates active investors. DePorre holds business and law degrees from the University of Michigan, is a member of the Michigan Bar Association and a former tax attorney and CPA. He lives in Anna Maria Island, Fla., with his wife and two children. Under no circumstances does the information in this column represent a recommendation to buy or sell stocks. Rev Shark appreciates your feedback; click here.