Wednesday, October 13, 2010

10/14/10 The Zero Tolerance Handicap

Re: Mr. October/ Heading for the Showers/ Zero Tolerance Policy newSubmitted by 2nd_ave (4740 comments) on Wed, 10/13/2010 - 21:02 #71532 (in reply to #71514)
bobbyo- Too funny. There are few mood swings on my part, of course, and I know you realize that. If anything, I'm pretty detached most of the time, and seek only to fade the prevailing mood.

In fact I remain quite bullish, both short- and long-term. A doubling of stock prices over the next 12 months for certain blue chips (INTC, CSCO, V, WFC) is well within reach, IMO.

From a trading perspective, my biggest problem right now is (near) zero tolerance for drawdowns (compared to taking them in stride). So I've missed out on several nice gains by being caught position-less rather than fully invested in a stock (today's move in V being a good example). I'm now out of INTC and WFC- both may catch me offguard and rocket higher while I'm 'asleep at the wheel.'

On the other hand, I'm pretty tired this week. That usually translates into making mistakes. The market (which resembles a casino in so many ways) will still be here when I get back.

[ADDENDUM] There is no lack of reasons to get upset if we indulge ourselves. The healthiest perspective is to realize it cuts both ways most of the time. This afternoon, for instance, I could have focused on the hit I took in INTC (knowing I would be preoccupied at work, I could have set a hard stop, but you could say I was 'blind' to the possibility it could sell off that hard). Instead, I chose to celebrate an almost unbelievable close for FSELX (Fidelity Select Electronics)- I noted that SMH had closed down -1.4% and was prepared for the worst (I had half of the buy-and-hold portfolio invested in it). When fund prices updated later in the day, it was a pleasant surprise to find FSELX had managed to close in the green!

25 comments:

  1. I really am tired. Heading for the sack.

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  2. Top 4 buying on weakness....

    BAC
    INTC
    MGM
    LVS.

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  3. David/CP...Great job guys, and 2 VERY different approaches. If it gets to be to much work, you both are invited to join my "pay service".

    I'm going to be looking really hard at BAC/CHK tomorrow...Well, and tonight. But I'm kinda tired too.

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  4. Damn....Just looked at the Futes. DX down ANOTHER .60%, ES up 5. This is starting to make me nervous.

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  5. Hey Gang been away awhile. Just want to check in and see how PAL and UNG is doing. I took a break from trading in August and changed brokers so I could short 3xxs.Making steady money shorting the VXX with a 10% trailing stop. Are we all going to Teams wedding. I love Coronado Island.
    Robear

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  6. RB- It has been a while! Nice move on the switch to be able to short those bad boys. Crazy soccer time here, as I'm sure you know. Want to take a shot as to where we go from here? :)

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  7. Mark,
    Going to a College showcase soccer tournament in Snottsdale, Arizona. This weekend. Hooray.

    As far as the market. The trend is up, So I think the market is going up (not in a straight line) to at least the April high even though I still think the Economy is really bad. I
    Here in Arizona my construction buddies have come to the realization that the "turnaround" is still a long ways off.
    My hedge, still think some international financial calamity could send the dollar up and this market down at any time. The Euro really recovered fast or our dollar got awful real fast. Got to stay on our toes. I know that team and 2nd are bullish. What is your take?
    Bob

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  8. RB- Bullish. Long SSO/V/CADC. Only about 35% ish. V is a really large position for me. 900 shares. Construction here is still tough, but I'm hanging in there. Looking at 3 projects for next spring. Remember though, I do the ultra high end. 2-6M.

    Does your daughter have a shot?

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  9. RB- You'll like this. Kendra scoring on a corner kick in the air in a State Cup game. The angle is wired.

    http://www.screencast.com/t/ZjEzZDQz

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  10. Awesome volley! Laces! I can tell the girl has savvy. Using the ref to shield defenders. From my many weekends at the soccer fields it is rare quality for a player at that age to have the foot eye coordination to pull that play off.Heck it is a rare quality for the 16 year olds. 9 out of ten times they punt that set up 10 feet over the net. You got yourself a genuine striker there. Count your blessings. I know you are an aficionado of soccer, but your kid could be a Right Defender. You could put in all the money, miles, and time to see your kid get 10 touches a game. Our state cup starts in May. Why do you play it so early?
    RB

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  11. Mark,
    "Remember though, I do the ultra high end. 2-6M."
    Isn't a 2 to 6 million house in NO Cal, just a 4 bedroom wedding cake house. Even the high end has been hit here. This custom house is for sale now 6bdr, 5 bath house, on 5 acre horse property for 925,000.
    http://www.homes.com/listing/121280767/5970_e_West_Miramar_Dr_TUCSON_AZ_85715#stay

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  12. RB- I don't know. The real Toury starts in about a month here (Ca.) and these are qualifying games. They have are in the "Gold" bracket already, so the rest don't really matter.

    Frankly, Kendra is a wuss and only plays well given space. Her defense is atrocious. She actually does much better when she plays for the U11's. Those girls can push her off the ball, of course, but they can't catch her and if they do, she can still beat then 1v.1.

    Her trouble will come when ALL the other girls catch up to her. And they will, it's just a matter of time.

    Next Summer she will be playing with a club team in Sweden that we have known/friends for 25 years. THAT will be the real story, but she's excited.

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  13. With profits at an all-time high, I am thinking really hard about how to reduce the risk exposure in my portfolio and make it more conservative. As such, I am placing a sell limit order at $18 for 1/2 of my remaining CEF (I sold 1/3 of my original position at $17.31 last week).

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  14. RB- No, a 2-6M dollar home here is really high end. Most of the homes I build are in Sonoma Co...So land value is less expensive. 6M get's you 30 acres, main house, 5Ksf, pool, guest house, 800sf, pool house, etc.

    How crazy is this. I've NEVER built a home that is the clients primary residence.

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  15. Since it looks like we'll get another gap up tomorrow in gold/silver, the last thing I need right now is a mid-day reversal and a red close in PMs, since this would be a typical scenario for the end of the rally (according to Bill). So I am placing a sell stop limit order at $17.65/17.60 for 1/2 of my CEF. Let's see which order will get hit first -- this one or the sell limit at $18. :)

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  16. "Some of the world's most successful hedge fund managers said on Tuesday they have turned more bullish on the U.S. stock market against a backdrop of stronger corporate and consumer balance sheets, as well as low interest rates."

    http://www.reuters.com/article/idUSTRE69B6NR20101012?loomia_ow=t0:s0:a49:g43:r1:c0.108527:b38303120:z0

    Ackman, who does not have any significant short positions in his portfolio right now, said he is even having trouble finding good "short" ideas at the moment. Many of the strong short bets made over the last three years of the financial crisis, applied to business models that have now gone away, he said.

    Time for a pullback in stocks? 2nd_ave is out of the market already, so the pullback must be really close by. :)

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  17. Mark,
    The country cottage. Nice. Here in Tucson many of the high end homes are second, third or fourth homes for people in the cold climates. I remember back in college landscaping all of these empty 7000 sq foot Air conditioned, weekend golf homes. I always planned on moving into one during the summer, because anyone with means would not set foot in the state then. I wouldn't of got caught, I was just chicken. Seemed like a waste. I'm sure their utility bill in the empty house was more than my entire rent at the time.Actually it still probaly is more expensive.

    Rb

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  18. Ritholtz made a post this morning titled "Melt-up?"

    http://www.ritholtz.com/blog/2010/10/melt-up/#comments

    Here are some excerpts:

    "The bottom line remains: Excessive pessimism, under-invested Main St, a gradually improving economy, backwards looking sentiment, and a flood of liquidity continues to make it challenging to be short this market. The Fed has made cash trash. Commodities, Tech, Ag, Precious Metals, Dividend yielders, Small Cap Tech, telecom are all sectors in play. My questions: Does this rally end once the bears throw in the towel and cover? Will it run through the elections? Can it go to year’s end? And will we ever see carbon based volume return to the market, or are we all just trading with Skynet?"

    Here is a comment from a user, which represents well the vast majority of other comments: "Don’t fight the Fed. This is a win-win market. Don’t think, just buy anything and everything with both fists. Buy and hold is back."

    So where exactly is excessive pessimism among the traders (not the economists -- those folks correctly look into the future and see QE2 not working)?

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  19. Mark,
    My middle 15 year old son has the same skill set. Real quick, great ball handler, but not physical and lately a lazy defender. In his younger years he would get many break always on through balls. The older he got the other teams just began fouling him every time he got an advantage. At his present level he gets pushed, held, gouged and just plain taken out with a low percentage of these fouls being called. To counter act this he is hitting the weights and sadly, learning to flop. So I would suggest Kendra get some strength training and acting lessons to prepare her for the next level.
    RB

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  20. David,
    What is your natty gas position. If you don't mind me asking. Is $8.00 UNG even possible this winter with roll over.
    RB

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  21. RoBear, I still have a lot of UNG and even more HNUZF. I doubt we'll see $8 for UNG, EVER. But that's OK -- by selling covered calls against my UNG a couple of times during the summer, I have reduced my cost basis to around $7.10. So in order to exit my UNG position with some gain, all I need is for UNG to rise to $7 and then I'll sell $7 calls on it for around $0.5 and hopefully UNG will stay above $7 long enough (let's say for a month) for these calls to be executed.

    As for HNUZF, I was adding on the way down, constantly reducing the cost basis of my total position. So if UNG rises to $7, then I should at least break even on HNUZF.

    Needless to say, this NG trade has not been kind to me for the past couple of months, and so I was quite surprised when the total profit in my portfolio broke out to an all-time high today, DESPITE the huge drag I recently got from NG.

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  22. I am glad that I didn't rush to buy $100 strike puts on FCX today -- judging from the late night action in $USD and in copper, I'll probably be able to buy them much cheaper tomorrow, which I'll definitely do in order to protect even better the recent profits in my portfolio.

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  23. David - I didn't want to say anything when I saw you posting about puts on FCX but I was thinking all along that that thing was going to $100. I suspect you would do well buying puts at this point in time so long as you keep your position small and buy them out a couple of months. That sucker is up 50% in about 1.5 months without more than a day pullback. Call buyers back in late August could be millionaires by now. Note to self: if we pull back again this one just might be the best play to buy a small call position on because they are most directly impacted by the Fed destroying the dollar.

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