There is an old adage among stock or futures traders to "sell on the news." The idea is that when the whole world knows something good has happened and a stock goes up because everyone wants to buy it, that is usually a good time to actually sell the stock, because after that news related pop the good stuff is already priced into the stock. In fact, the very best stock plays happen when a contrarian takes a position that goes against the conventional wisdom (and is therefore cheap to buy) and then news breaks that shows that position was indeed correct. The world then beats a path to the stock, it jumps in price, and then the contrarian gets out with a nice profit, while the world buys a stock that has already gone up and has all the good news already priced into the stock.
In the tech start-up business, we used to say that when you are on the cover of the magazine (Time...Business Week...) because you company is cranking, that's the time to sell.
So I was driving to work the other day, thinking about Iraq, listening to the news on the radio, and it occurred to me that political positions on policy act exactly the same way. The vast majority of people and politicians were for the Iraq war. I was against it, not because I am against the use of force, but
1. It was a distraction from the war on terror
2. It would be the best recruiting poster possible for the terrorists
3. It would create a hornet's nest of sectarian unrest
4. It would create a power vacuum with no counter-weight to Iran and the Shia militants supporting Hamas and Hezbolah
Now that we are there though, for the same reasons 2-4 listed above, I believe we cannot simply withdraw from Iraq right now. But the rest of the public and many of the politicians want to get out quick now...I smell an investment stampede.
What really burns me up though is that the pragmatic approach in Iraq (i.e. Baker-Hamilton) is getting very little attention or support. The President's strategy is to win. His tactics are to surge 20k. The largest bloc in congress against this policy however is stampeding in the other direction.
Will the smart and pragmatic policy-maker / contrarian investor please stand up?
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