With the S&P/TSX index in the green by about 10 per cent year to date, your portfolio of Canadian stocks ought to be in decent shape these days.
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But we have been hearing disturbing gurgling sounds from market masochists who have been sinking with some of the market's Titanics.

The market masochist, whom we will call M.M. (not his real initials), is a curious breed of market player who thrives on pain.

To our pal M.M., one dose of stock market pain just doesn't do the trick. Nope, M.M. has a penchant for doubling the pain by averaging down on the first batch of bad news, thus increasing his position with the goal of attaining a lower average price.

In stock market lingo, buying a stock while it is in a sharp downtrend with no sign of reversing its form is known as catching a falling knife.

Catching falling knives, or throwing bad money after bad money, is a way of life to M.M.

And what a wonderful year it has been for catching falling knives. M.M. has had a rare opportunity to catch more than a few hapless losers, much to the delight of the short sellers.

Falling knives have been more prevalent than ever of late, particularly on the Toronto Stock Exchange.

And these are not butter knives that we're talking about here. These are razor-sharp knives capable of inflicting horrific pain over extended periods.

A few years ago, a trader could occasionally take advantage of a stock that was oversold on bad news and catch a short-lived rally known as the dead-cat bounce.

Well, these days most of the dead cats have all the life of road kill.

Street-smart shareholders, smitten by disasters such as Enron, WorldCom and Nortel Networks in recent years, only need to catch a whiff of a rat on the first dose of bad news and they're running for cover.

When they sell, M.M. is waiting with open arms, catching the shares, and the knife, on the way down.

While the market has been performing admirably this year, it has been the calamitous stories that have been stealing the headlines. This year's deepest stock market blood-lettings have borne a striking resemblance to a drawn-out Mexican bull fight – fun only for M.M.

The most brutal selloffs are triggered when a company's numbers don't add up. There's nothing shareholders hate more than a broken adding machine.

A classic example of this is the merciless selloff of Nortel shares in recent months.

When the yogurt hit the fan at Nortel Networks (TSX:NT) in April and it was discovered that perhaps their adding machine was broken, the shares promptly tanked from $7 to $5, paused long enough for M.M. to double down, and have since broken more barriers en route to the $3.50 range as investors contemplate whether the adding machine is beyond repair.

But not all these spectacular tank jobs are performed by seasoned Titanics like Nortel with their credibility in shreds.

Even a one-time stock market darling such as WestJet (TSX:WJA) can be ripped to shreds on news that leaves shareholders questioning a company's credibility.

In the weeks after Air Canada launched a $220- million lawsuit against WestJet in April over allegations of espionage – Air Canada alleges that WestJet gained access to an Air Canada employee website to gain proprietary operating data – shares in WestJet plunged from the $17 range to the $14 range.

But it didn't stop there. The selloff eventually continued, taking the stock to the $11 range.

The market can't stand uncertainty and, as long as the cloud of a lawsuit hangs over WestJet, shares in the airline headed by one-time corporate star Clive Beddoe should remain vulnerable.

This fall from grace has Internet chatboard punters dubbing WestJet wastejet.

The tank job of shares in Royal Group Technologies (RYG.SV) has been even more severe.

Once investors caught wind of the seriousness of investigations into Royal Group in May, the shares quickly plummeted from $16 to $13.50, but then, with the plot thickening with a criminal investigation, the stock has since traded as low as $9.48.

Another prime example of a stock that has had trouble finding a bottom is CoolBrands International (TSX:COB.A). This used to be one of Canada's coolest stocks, but the maker of frozen treats has taken a licking on the market ever since July when it announced problems with a licensing agreement with Weight Watchers.

Our pal M.M must have been licking his lips when the stock quickly imploded from $23 to $10. But Coolbrands recently traded as low as $6.84.

In July, Bennett Environmental (TSX:BEV) was trading at $17 when the company reported a dramatic change in the scope of a previously announced contact, and the stock was promptly cut in half to the $8 range. It has since been halved again and was last seen in the $3.50 range.

When CP Ships (TSX: TEU), once regarded as one of Canada's most reliable stocks, stunned the market by announcing a restatement of earnings in August, many shareholders walked the plank, rapidly beating the stock down from $23 to $17.

But the CP Ships formchart wasn't much different from the other disasters. The shares were recently pounded down to the $15 range.

If the news is bad enough, shareholders are almost always better off dumping than waiting for the storm to blow over.

A stock may appear cheap when it's 50 per cent off its 52-week highs but these days, more often than not, a ruthless market can turn your beloved stock into roadkill in a matter of a few weeks.

Of course, if you happen to be a market masochist looking for double trouble, cheers. You're having a banner year.

* SAGE WORDS: "Stupid is as stupid does."

– Forrest Gump.

(Gyle Konotopetz can be reached at gyle@businessedge.ca)