Buy on the Rumor, Sell on the News

There's an old Wall St. adage that says "buy on the rumor, sell on the news."

Since 10/3/11, the market has rebounded over 11% on the prospect of a European solution that will both fix the sovereign debt crisis as well as the over-leveraged nature of their banking system.  I suspect that this rally is largely a head-fake and my attention is better spent focusing on what companies to buy when the market ultimately reverses.

Despite my efforts to maintain emotional tranquility, this rally irritates me. It irritates me because it wears on my discipline in remaining mostly not invested. It's hard to watch a market rebound 11% and not think, "great I just missed a buying opportunity," or "if this rally keeps going, I'm going to
look like a fool." That's the hard part of investing, the value grind. Maintaining your discipline and sticking to your guns on what prices to pay for different companies is one of the hardest parts of investing (and I would argue, even harder then watching a stock you own drop in value).

This is where the value philosophy is so helpful. Instead of getting annoyed over the markets ability to pump up stocks on speculation of a European panacea, I should just smile and say, Mr. Market is here to serve me. Today he is not offering me anything I want, but maybe tomorrow he will.

In the mean time I wait, and wait, and wait.