It looks like at least half of the old stem is dead. You'll probably have to cut the heavy stem back to just above where the new growth is emerging. After you do that, if the part you cut is living, seal the cut with waterproof wood glue to prevent the stem from drying/dying back from the cut and creating an unnecessarily large scar.

Your plant wants MUCH more light than it's getting, and should be repotted. Growth is being significantly restricted by the pot size.

Al

Thanks for the feed back! i just got this off craigslist yesterday! I am gonna repot it and cut the trunk back! Thanks for the help!!

It's a nice plant. I'd make a plan that includes having a very fast draining soil at the ready at repot time. I can help with that if you're interested - your soil can make a very significant difference in how well this plant grows and the plant's o/a health. There is less risk of trouble if you wait to repot until early summer when the plant is growing well. When you repot, you should bare-root the plant and move to a larger pot. The plant would prefer it's summers outdoors in full sun, but should be acclimated by moving the plant first to several days of shade, then morning and afternoon sun for several days, then move into a full sun spot during a cloudy period if possible. 10 days to 2 weeks is about the right amount of time to acclimate this plant. Don't despair if lower leaves start to fall off soon after the acclimation - it's normal.

Al

Would bonsai soil work well with this? I have a lot of that... im new to the pony tails... So you think i should wait to repot this tree till summer? Thanks again!!!

Not all bonsai soils or soils with a gritty texture are created equal. For instance, Hoffman's bonsai soil, while very expensive, is a very poor choice for bonsai because of its excessive water retention.

Here is what I use for all my bonsai and succulents
{{gwi:1295}}

It drains exceptionally well, doesn't support a layer of waterlogged soil at the bottom of the pot, and costs a fraction (to make) of what most most bonsai soils prepared by others cost.

Understanding soils and how to make them work for you instead of against you is a very important part of the container gardening puzzle - I think it's by far the most important part. If you want to learn more, let me know and I'll direct you to a thread that will help you put it all together.

Al

Thanks Al! I would like to know how to make my own soil!! My soil looks close to yours. I Usually buy from Wigerts. Thanks!!