How Did That Feel?

If you invest $10,000 & the investment declines by 75%...then increases in value by 100%...how much are you down? ...50%...ouch!

$10,000 x 0.75 = $7,500. $10,000 - $7,500 = $2,500. $2,500 x 1.00 = $2,500.

$2,500 + $2,500 =$5,000...still down 50%.

How does that feel? How realistic is it to expect a double in an investment that was so impaired or damaged? Hoping for this outcome seems fruitless & unlikely to happen.

Many investors are not only hoping that they get this or a better result from their existing longterm investments, they are making the decision to invest more in these impaired assets looking forward to doubles & triples as the stock market will surely recover & surges to new heights...at least according to many pundits on CNBC.

A quick look at the 'Japan Experience' & its 'Lost Decade', which is turning into two decades, shows quite clearly that further asset destruction is possible & may even be likely, based on recent US government efforts that look alarmingly similar to what Japan did which perpetuated the economic malaise.

I have a few clients that decided to ride on Warren Buffets coattails in mid-October. They read Warrens Op-Ed, "Buy America. I Am" which was published in the NY Times on October 17th & that was enough to put their fears to rest & allow them to ignore their devasted portfoilos for just long enough to encourage them to say "buy me some of what Warrens buying". That has proven to be a very poor decision...to the tune of 30-50% in many hiqh quality blue chips stocks including GE, Goldman Sachs, American Express, & Wells Fargo...all Buffett favs.

So I ask again...How does that feel? And whats the likelihood that you will do that again?