The market is churning and chopping and going nowhere fast. Breadth has slowly improved, and there are some underlying bids holding us up, but not much aggressive accumulation to drive things. I'm just staying patient for the most part at the moment.
I've written in the past about how periodically selling all your positions and going completely to cash can be very advantageous emotionally and psychologically for a trader. The sense of freedom and clarity that this can bring is quite liberating. When you have no stake in the market, you can be totally objective. All the worries, hopes and other emotions that impacted your judgment are now washed away.
Recently, I was reading Barton Biggs' very well-written book Hedge Hogging and was surprised to see that he also was a proponent of periodically starting fresh. It surprised me because managers with hundreds of millions can't do this that easily. He mentions that both Jesse Livermore and Bernard Baruch, who are regarded as two of the best investors in the first half of the 20th century, would sell all their positions and go on vacation when they felt stale or out of touch with the market.
A couple comments that Biggs makes on this topic are worth some reflection. He writes that "when you are working with an existing portfolio and reshaping it, there are unrecognized, subconscious, emotional hangups that block you from impartial, cold-blooded investment actions like selling. ... It's hard to make yourself give up on a position, especially since you suspect, as soon as you do that the ornery, cussed thing will rally."
Every stock we hold carries some emotional baggage. We are loyal to big winners because they have treated us well, and we hold onto losers because we don't like to admit that we are wrong and are holding out hope. There is no way that we can be totally objective about stocks until we sell them and no longer have to wrestle with our emotional attachment to them.
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