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reddingrunner (92.02)

Not a bad day



August 28, 2007 – Comments (0)

For long-termers today had a big silver lining.  Yeah, it cost me a lot of money in a sense but I knew LFC would drop after yesterday's big gain and I sold off some of my Garmin last week figuring it was overpriced.  So, in spite of my losses, here's why it wasn't so bad.  

The stocks that seemed to get hit hardest were those that had run up the most.  The stocks that have been underperforming tended not to get hit so hard.  Thus, on CAPS, my raw score dropped but my accuracy increased.  What we are seeing is a reversion to the mean.  If this keeps up, stocks that have been out of favor (a lot of my CAPS picks!) should begin to correct.

A reversion toward the mean, for both high-flyers and bottom-feeders should help to calm down the volatility we've seen lately.  Then the influence of day-traders will wane and the influence of long-termers will increase.  Stocks will move back closer in price toward their true values.  

If I'm right, this is good news.

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