The Obama Effect

President Obama stepped to the podium to speak about AIG's bonus babies and the market rose from 120-something to 140-something in the next 45 minutes or so. His talk was only about 10 minutes long (or less), but his confidence has a hypnotizing effect on the markets.

Too bad it didn't help me. I exercised caution early, hanging on to my small position in Citigroup, then opening a trading position in C at 2.01, and then selling the trading position at 2.21. I was about to cancel my sell when I saw that a major seller was holding things up at 2.20 ... I realized that if buyers knocked that wall down, it might be clear sailing to 2.25 or 2.30. I was right too late. The stock zoomed straight to 2.30, hitting my sell order at 2.21.

I was OK with that. Better to sell too early. But as C -- which closed at 1.78 on Friday -- ripped to 2.40, then 2.50 and all the way to 2.68 in Usain Bolt-record time, I felt horrible. And that's not allowed, especially toward the end of a five-day rally. As the stock fell back to earth (or at least the stratosphere), I grabbed more shares at 2.54. Then more at 2.40. Then, the last sell-off brought it down to the 2.20s and I added more at 2.26.

Wise? No. I should've shut down the laptop and ignored the market the rest of the day after making that early trade (10% gain). But the temptation got me, or rather, I succumbed to emotion instead of following the game plan. So now I'm holding the bag. I still have my shares from Friday (1.70), so my average cost is 2.30. C could stay there for a few days, months maybe. Or simply suck down the drain back to 1 buck. It could run up and down, back and forth, then break through 3.00. Who knows?

All I know is, management and discipline separate the winners from the losers, much like a 2-minute offense or controlling the clock in the waning minutes of a tight basketball game. I kept shooting 3-pointers while I had a lead. Obama's effect was temporary, the markets sold off into the red and now I am in the negative (on paper) on a day when C gained 30.9% (closing at 2.33). In hindsight, I shouldn't have added more positions to the same stock when there's so much profit-taking. I simply got too confident when the stock dipped from 2.68 to 2.40, then went back up to the 2.60 area. A sell there would've been fine.

Instead, I held on and didn't put in a stop-loss sell order. Lack of discipline, breaking Rule #1 (Phil Town). I'm not upset as much as I'm disappointed. Like any loss or victory, though, it's always best to move on and live in the present.