Many Firms and Friends Disappear due to the Wild Markets

Bear Sterns, Lehman Brothers, Indy Mac Bank are Gone. Merrill Lynch was merged with Bank of America by the Federal Government. AIG was taken over by the Federal Government. Goldman Sachs and Morgan Stanley are now Commercial Banks.

If such drastic changes can happen to the largest financial companies the damage it can do to individual investors and traders can be far worse.

My friend AL the "investor" had build a great stock portfolio made up of stocks like FCX, RIO, TRA, TNP, VIP, CSCO, EMC, STP, GE, BYD, TIE, DSX, ABX, NEM, ect. He told me these were "Good" companies. He believed he owned "good" companies because the Media may cover or mention such names more frequently. He has never read the financial statements of these companies. He was emotionally attached to the idea of these companies, and would say things like "they have good assets". When we first met he told me he used both fundamental and technical analysis. After many meetings with AL trying to convince him to invest money with me, it was clear that AL had fallen in love with his portfolio. He thought he had put too much work into his stock portfolio to sell some of his holdings. Every time I suggested to sell a stock based on Technical Analysis he would argue with me the selling was overdone, and it should be supported around a certain level. I was not convinced. Anything Bearish that I would say about the markets he would refuse to believe. Being Wrong was too uncomfortable for him to confront. He had no risk management. He let large percentages of his stock portfolio move against him. During the Bull Market his portfolio performed very well.

My other friends who considered themselves "Traders" suffered far more traumatic and larger losses than AL in this volatile market. These Traders have lost virtually all of their funds, and perhaps even more if they were operating using burrowed money. The mistake these Traders made was not using effective risk management methods. They made a prediction that the markets would bounce, got long, added to their losing positions, and watched their accounts deplete themselves. I went long around the same time as some of these Traders, recognized I was wrong, and covered my positions after my max loss limit was hit. I was obviously concerned for the financial fate of my friends, and gave the best advice I could. Ultimately people make their own decisions, and these Traders chose their fate. My Phone calls and text messages to these Traders have not been returned.