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Good day Mozdzeni,

However, when the Federal Reserve board is raising intereset rates to cool the economy, and stock prices are at unreasonably high levels, and the S&P 500 has been growing at 20% per year for five years, THEN one wonders why so many stayed in a market that was obviously headed for a crash, and took large losses.

I think it's very well to be able to say "obviously headed for a crash". We're looking at things retrospectively, and it's easy to beat up on decisions made in the past. However I'd like to make two points:

1. If it was obvious everyone would have bailed out. This would mean that both longs would have sold off, shorts would have covered their shorts, and what you'd see is just the crash happening earlier. So the effect would still be the same, though the timeline might be different.

2. When things are happening, and you're caught in the wash of a trend, it can be easy to believe that it will go on forever. I am sure there were many investors, nearing the height of the bubble, who thought that things couldn't go on forever. But the way each day went on, it was easy to say, "Not yet... not just yet..." In a case where irrational exuberance was running wild, it would be easy to imagine the 'obvious' thought, that the bubble would burst. One might as well say that with things hitting an all time low, it is 'obvious' when the fall will bottom out and we should start buying again.

I do see your point though, about the fact that we shouldn't measure performance with how badly others are doing, and feel good about it. Yet the brothers Gardner have always made it clear that this portfolio was a learning one, and shouldn't just be aped by everyone hoping to ride their coattails. Sure, they've probably got a lot more money to lose than many of us, but they still did lose. But insofar as we may choose to use a certain index as a benchmark, I feel it's justified to say that a loss less than that of the chosen benchmark can be said to be a victory of sorts, albeit a pyrrhic one.

Wolfseye (WE)

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