Fingers crossed for a fall in share prices.
It's been a great year for investors, but suddenly I'm not enjoying looking at my portfolio as much as I was a week or two back.
The FTSE 100 dropped 2% yesterday, and Barclays (LSE: BARC) and a couple of my emerging markets investment trusts are down 5% in a single session. I can live with that, but I'm not too happy about one or two of my recent decisions.
A few weeks ago, I also made a disastrous recent foray into washed-up banks, throwing good money at Lloyds Banking Group (LSE: LLOY) and Royal Bank of Scotland (LSE: RBS) for reasons that now seem inexplicable, and was routed. Lloyds is down 26% and RBS is down 21%, and I have to admit it serves me right.
I threw money at them in a careless moment, based on a couple of half-baked suggestions that they could double their value, rather than taking a cool and focused look at the banking sector and their individual prospects.
I got greedy. That's what happens when markets have been ladling out the gravy a little too long.
What a pudding!
When your luck turns, it turns. I was down 8% on both Prudential (LSE: PRU) and Jupiter India within three seconds of clicking "buy". What kind of Fool am I? At least I didn't make the mistake of thinking I was wise during the good times, confessing in September that I'm not the one getting everything right, It's the markets, stupid.
But my recent share buying decisions have certainly been rash and I've got my just desserts.
My only consolation is that these are all intended to be long-term buy and holds, so I shouldn't get too distracted by short-term price movements. As I wrote in A lousy year to sell shares, the only monumentally bad decision I've made this year was to sell off good companies with strong growth prospects too soon.
No, actually, Lloyds was a terrible decision.
5,500 or 4,700?
At time of writing, the FTSE has just closed at 5,068. The way 2009 has been, it is anybody's guess where it will end up at year end. It could still rally to hit 5,500 to make this a barnstorming 12 months, or it could just as easily slump to 4,700. Nobody knows.
Perversely, I hope it doesn't race ahead. We've had enough fun for one year, let's leave some growth prospects for 2010. I also suspect stock markets have raced ahead of the broader economy, and the economy needs some time to catch up.
And I'm worried that excess liquidity from low interest rates and quantitative easing has flooded equity markets, leading to bloated valuations. The last thing we want now is another unsustainable surge. A bit of treading water wouldn't go amiss.
Calm down, people
A slowdown now might also temper the excitement of private investors, who have been pouring into investment funds like there's no tomorrow.
Fund managers have enjoyed record net retail sales, selling more in the first nine months of this year than the whole of 2000, the previous best sales year on record, according to the Investment Management Association. Maybe that's the best sign that that this boom is getting toppy.
The current reversal could be a much-needed shot across their bows. I hope so. I don't know about you, but I've had enough of boom and bust.
A multitude of sins
Another worry is that flying share prices may obscure the need for serious reform and restructuring of our banking sector, if not the whole City, both of which have been having more fun than they deserve this year.
And given the tax hikes and spending cuts heading our way, it doesn't make sense for the stock market to be all fun and games.
Others may actively want markets to fall, so they can run around buying stuff on the cheap. I suspect Maynard Paton is, so he can load up on cheap stocks and get his Champion Shares PRO portfolio off to a flier.
I'm trying to get into the same mode of thinking, but it isn't easy, especially since I have now invested most of my spare cash (badly).
Please sir, can I have some more?
We should be pleased that markets are pausing for breath, or even retreating slightly, even if it does hurt.
If you're investing for the long term, as I am, a short-term stutter can present healthy buying opportunities. It also give us all a bit more time to decide where we want to go with our portfolios, rather than ploughing in because we're worried markets will rise even higher.
A dry end to this champagne year may be a good thing. It might give us more sober expectations for 2010, which looks like being a rumbustious year, politically and economically.
More from Harvey Jones:
Harvey owns shares in Barclays, Lloyds Banking, Prudential and RBS.
