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Dear Shrink Rap: I am scared. I know it's mostly irrational, but it's there all the time. I am a bubble baby, having made a lot of money without really doing any work. It feels like if I go back in, then this undeserved money will be taken away by the cheats on Broad and Wall or some outside event. It doesn't matter that I got out with a 15% loss from the top and have been able to recoup about half of that through interest and savings. That wasn't the main thing I lost. I lost trust in myself and the way the Street works, but I know I can't afford to turn my back. I don't want to play their game, but if I don't, I'll slowly go broke. Stocks used to be my friend, but now the thought of them makes me sick. I knew small-caps would be good two years ago and that buying after 9/11 was something that needed to be done, but I just can't do it. I know there will be many good opportunities in the future, but that knowledge just increases the anguish.
-- CT

Shrink Rap:

So, bubble baby, let me see if I understand your lament. You are scared and disgusted, both of which make sense to me. I don't see any problem with being cautious enough to stay in cash and wait for better times. As I've said

before, fear is just another name for somethin' left to lose. Nobody ever went broke by preserving their assets.

Crawling Toward Death Valley

Anyone can feel fear and want to protect their assets now, as all the major indexes are negative year to date, and the market is clearly continuing its downward crawl toward Death Valley, the lowest point in the country. Warning season is about to begin, and it is likely we will see further disappointment as companies announce earnings misses.

Or, to use a slightly different metaphor, as my friend Peter Navarro, an economist, puts it: "This is a slow, grinding 1970s-style climb down the mountain. Everybody keeps waiting with morbid fascination for the climbers to once and for all plunge to their death -- the much-awaited capitulation. Instead, our intrepid explorers just keep zig-zagging down -- with an occasional upward traverse."

But being scared is a different issue than feeling like an "undeserving" recipient of your gains from the bubble years. If what you mean by losing trust in yourself is that you made your money by jumping on the bandwagon and never really needed to learn any trading skills, then it doesn't seem like a big deal to go ahead and learn what skills you need in order to handle far more difficult markets.

Dealing With Guilt

Your real concern, however, seems to be feeling undeserving of your gains and therefore guilty. Sounds like a form of "survivor's guilt." Let me ask you this: Do you think anyone else who made money during that era feels guilty? (Unless they made it illegally, and then they


feel guilty!)

Do you think all the investment bankers, analysts, and brokers feel guilty? Do you think Joe Battipaglia, Abbey Joseph Cohen or Jeff Bezos feel guilty? Or those who capitalized on inflated IPOs? Or those traders who deftly helped take stocks into the stratosphere before they then helped cascade them back down to hell?

So please be clear: You have nothing to feel guilty about because you held on to most of your gains while so many others didn't. What you ought to be feeling is

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Be grateful you managed not to give back much or all of your gains as did so many of your bubble baby brethren.

The nature of the market hasn't changed. Those who are more knowledgeable and sophisticated and who manage to move faster and are more skillful in their timing will always have an advantage. The market is not some democratic institution where every investor has an equal vote. Never was, never will be.

As it does for you, the thought of stocks now makes large numbers of people sick. And you know what? Most were not as fortunate as you to recoup some of their losses. They will never see their money again. So your disgust for stocks is nothing unusual or worth worrying about.

When I feel disgust, I simply remind myself that this is the "opposite but equal" reaction that comes after so many bubble babies like yourself were baptized into the market with easy gains. Many took advantage of the frenzy to make as much as they could -- sometimes by lying, bending the rules or engaging in all kinds of other behaviors that were typical of the "come-and-get-it-while-it's-hot" greediness that swept the financial markets. In that environment, ethics tend not to be a vital concern. We liked financial heaven, but we can't stand the fire of hell.

News Flash: A Better Market Isn't Here Yet

And you are correct: There will be many opportunities in the future, when the risks are not so high and the news not so ominous. Stay on the sidelines until the trend has changed.

Don't let anyone tell you that being in cash is a bad thing. Individual retail investors and traders have the luxury to sit on the sidelines as long as we wish. I'm putting my mouth where my money is: I'm now 80% in cash in my retirement trading account and 91% in cash including all other savings and trading accounts. There are just too many good reasons to step aside and let the guys who run other people's money take the added risks.

I mean, no good reason to throw out the bubble baby with the foul-market bathwater, right?

Steven J. Hendlin, Ph.D. is a clinical psychologist in Irvine, Calif. He has been in private practice for the last 26 years, investing for the last 20 years, and actively trading online as a position trader and long-term investor since 1996. He is the author of

The Disciplined Online Investor and maintains a site at He is pleased to receive your comments and questions for publication in his public forum columns at , but please remember that he is unable to provide personal counseling or psychotherapy through the mail. has a revenue-sharing relationship with under which it receives a portion of the revenue from Amazon purchases by customers directed there from