Originally Posted by
tsptalk
I got an email from one of our members; someone who has been loyal reader of TSP Talk for a long time (although doesn't post on the forum) but who always seemed a little unsure of things. Of course I won't give a name and this isn't intended to embarrass anyone, but it is such a great illustration of the "I give up" capitulation people feel when they are wrong for some time. The question was actually in regard to the IFT limits and what they were able to do, but I can feel the frustration.
They wrote:
"I was in F all of January….and in the beginning of February…….I should have “stayed” in F, but, I put it back in stocks….If I put it back to F now...."
We generally equate capitulation with some who is in stocks while the market is falling, and they eventually give up and sell when the losses start to get too painful. That is usually about the time the market stops falling as the final people who are left to sell, do sell, and markets stop falling when there are no more sellers (that's a very simplistic explanation).
But the email I received is an example of a bear capitulation. They sit on the sidelines missing gains and finally say, "I give up"... "I know stocks are high but I missing all of these gains and can't take it anymore."
If you "give up" early enough it can sometimes work, but if you wait for the pain, it's usually too late. When the last of the buyer holdouts buy, there's no one left to buy so the market starts to pull back. (again, very simplistic example).
Anyway, I thought it was a teachable moment.
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