THE ALCHEMIST by AL THOMAS
THE SHADOW
The Shadow knows. There used to be a radio
program called The Shadow where the hero, Lamont
Cranston, the Shadow, would overcome the shadowy
forces of doom by clouding the vision of those
around him. Who knows what evil lurks in the
hearts of men was their intro line. They were
great shows and you can still find them on the
Internet.
The stock market is kind of like the shadow. As
you walk along with the sun at your back you cast
a shadow. No matter which way you move the shadow
stays ahead. Fast, slow, right, left. It doesnt
make any difference.
An equity market is the shadow of the economy
staying out in front following every twist and
turn. Depending upon the height of the sun the
shadow may be long or short. You can see it either
as a long term or short term prediction of the
passage.
If you did not know what a shadow was you would
not realize it is telling you something about
where you are going. If you see the shadow fall
across a hole you know you must step over or
around it depending upon its width and depth. The
path of our economy is predicted by the direction
of the stock market. When things are good and
everyone is making money the shadow seems to go up
and when the economy slows (for whatever reason)
the shadow darker and heads down.
At this time (11/04) the sun is shining brightly
and the shadow stretches out long and friendly
before us. The stock market is going up and
everyone is feeling good, but we also know that
tomorrow storm clouds may appear making our shadow
seem to be a monster black image that hides the
potholes in our path.
When that occurs we must be ready to put on our
raincoat to protect what we carry through life.
One of the most important is the money we have put
aside for the time we wish to depart the path, sit
by the road and contemplate all the beautiful
things we have brought. That means we must guard
against losing what we have created and not let
the shadowy rain cloud wash them away.
That raincoat for your investments is an exit
strategy for your portfolio. Without a plan to
protect your assets it will be too easy to seem
them washed away. This does not mean
diversification which is what brokers want you to
do. It means a plan to exit (sell) stock and
mutual funds that are going down. This can be done
with a simple percentage stop-loss order for your
stocks and a mental stop loss for funds.
Brokers never want you to sell even though there
may be a commission involved because once you
money is in a money market neither they nor the
brokerage company makes any money. You and only
you care about your money so you must protect it.
Think about an exit plan now and put it into
place.
Do not become a victim of the dark shadow.