Retract too early/Make prop curly/You’ve gotta wait/For positive rate. Usually accompanied by a cartoon sketch of a bent propeller, posted on the bulletin board in pilots’ lounges.

I went long too early, clearly. I thought the values were compelling - and they were, and are. Fortunately, the drawdown is not serious and I added to my positions at even lower prices. Friday’s rally was encouraging, but we have had these before and they have quickly reversed. If that happens, I will hedge my positions. But the yields on the income trusts are just staggering, over 25%. I know energy prices are down, but these companies have hedged much of their output through 2009.

I even bought some bank shares on Friday - Scotiabank, one of the large Canadian banks and an old employer of mine, priced at half of their price a couple of months ago. A good company in what is now rated as the safest banking system in the world.

However, I am amazed at the lack of reaction from the public. Perhaps people are just stunned, or in denial. But everything seems business as usual. Fidelity Magellan, the mutual fund I use as a benchmark, is down 58% year-to-date. It is a large fund and should be pretty representative of the performance people are seeing from stocks and mutual funds. But there’s no sign of panic, really. I find this a little spooky. If my portfolio were down that much I would be having panic attacks, I think.

The messages that people need to take away are:

• Stocks may offer higher returns, but only at the price of much higher volatility and when bought right. You have to buy them at low valuations. Buying over-valued stocks is a recipe for trouble, even if your time horizon is long.
• Mutual funds and investment advisers who don’t provide some form of market timing are a joke, the fees they charge are just money down a rathole. A lot of money, too, in many cases. And even worse, thinking that they know anything you don’t gives a false sense of security.
• Wall Street is your enemy. It makes vast profits at your expense, not by being smart but by being in a position of information advantage. It knows its clients’ positions and intentions and exploits that knowledge for its own gain.
• Most advisers are incompetent. They drink the Wall Street and CNBC Kool-Aid and pass it on to their clients. In the event of my being unable to manage our investments for whatever reason, my instructions to my wife are to put the money into Hussman Funds. There’s a guy (John Hussman) who provides value for his fees.

Anyway, at some point the short-covering in the US dollar will be over, and the dollar will resume its decline, boosting energy and the other commodities (to say nothing of the Canadian dollar). And my portfolio, hopefully. But we’ll see. There’s no crystal ball, I just look at conditions and try to position accordingly.