I don’t know about you, but I get excited when I see a lot of red on my computer screen in the morning.

You know, red because most of the stocks I watch or own are trading lower?

It’s almost like the smell of fresh coffee being roasted and waking you from a sound sleep in a pleasant and harmonious manner…

Maybe I just wake up on a different side of the bed than most people…but I digress.

There’s a saying I’ve heard: If you can’t sleep at night because you are afraid of what your stocks are doing, you are too heavily invested.

It’s simple but true.

The Tale of The Tape

So today I wake up to find my glorious sea of red, and got really excited to see the markets fall like they did because it means I can add to positions that I already have, or start new ones in company’s I have been watching for a long time.

I’m nothing if not patient.

So what caused the market’s decline today?

Does it really matter? Do you really care?

I mean once you see where your portfolio is in terms of the gains and losses, the news is an afterthought. You just look at the little up or down arrows, see a large decline (unless you were really lucky), and everything else just melts away into obsolescence.

So what “caused” the market to decline today?

Well, there was some talk about a lower jobs report than “analysts” were expecting, and some junk about a possible recession.

If you honestly believe that’s why the markets tanked today, I’ve got some real good land in Florida and California for sale at bargain basement prices with superior financing available!

To further the lunacy, I read a headline that proclaimed that this was the worst 3-day start since 1932 for the Dow and the S&P 500 has seen its worst start to the new year since 2000.

Umm…ok.

So this decline is different than others because it happened in the first 3 days of the year? And how exactly is that different than if it had happened in the last 3 days of last year?

Or what about the mean differential between the 3 day period after Black Friday and the Winter Solstice? What about the variance within the Nasdaq when there is a full moon preceded by unusually strong currents in the Gulf Stream?

I want answers dammit!?

The REAL Reason the Market Declined

You want to know the real reason why stocks went down? Here’s why:

People with a hell of a lot more money than you or I have available to trade with, decided that today’s “news” events presented an excellent time to lock in gains and not have to pay capital gains taxes on their winnings till 2009!

Or maybe they just felt like selling? Maybe they started shorting stocks expecting them to decline further? Maybe mutual funds, hedge funds, and other “big boys” all jumped aboard the bandwagon, and once the selling started, they had to cash in their chips or risk losing out on their gains. Maybe…

The same holds for up or down days in the market, days when the market “crashes” and periods of time when these trends linger.

For instance, from 2000-2002, stocks declined almost without fail. It was one of the worst bear market’s in history.

So what happened?

Well, from 2002-2007 stocks rallied for one of the best BULL markets in history!

The past has no bearing on the future, and whenever anyone tries to tie the two together, in terms of this market resembles the post war 1993 market, or depression era market, or anything, they are deluding both themselves and their audience.

So Where Does This Leave Us?

As of today, it leaves us about 10% from the ALL TIME high on the Dow and S&P 500! Yep, that’s right. For all the doom and gloom, we’re only 10% from the highest level the Dow and S&P have ever reached!

Puts things in perspective doesn’t it?

Declines are part of the cycle of the market.

They are to be used to put new money to work. Not necessarily all at once, since we never know how long a decline is going to last (weeks, months, years?), but we have to have courage that we’ve done our homework, due diligence, and fully understand the companies that we follow enough to know if there are fundamental problems within them or whether these short term shenanigans are purely market driven.

That’s why I can sleep easy at night, and why I get excited by down days.

I’m never over-committed to any one position, always have capital to put to work if the opportunity presents itself, and ALWAYS do my research on any company that I own to the point of which I feel I’ve done virtually everything in my power to verify that it is a good investment, and therefore, the rest is out of my hands, and time will prove my thesis right or wrong.

You’re never going to be right 100% of the time, but if you are right merely 6 out of 10 times, your portfolio will zing.

It’s should be simple for most of us: find great companies, regardless of the economy, sector, etc., research them thoroughly, buy on dips and never all at once, reevaluate when necessary, and then sit tight.

That’s what I do with the PeakStocks.com portfolio, and why when I add a name to the list and purchase shares, I am behind it 100%.

If you don’t feel the same way about the stocks in your portfolio, or get anxious, scared, angry or nervous when they decline, then maybe you shouldn’t have bought them in the first place.