Friday, February 17, 2012
2/17/12 Out of the blue and into the black
Hey hey, my my
The 2012 rally ain't ready to die
There's more to the picture
Than meets the eye
Hey hey, my my
My my, hey hey
The 2012 rally is here to stay
It's better to burn out than to fade away
My my, hey hey
Here's the deal, Neil.
(a) Monday Greece makes bail, and global markets rock.
(b) US traders can thank President's Day for the lock down.
(c) We gap up +250 points on Tuesday.
The market wants to go up. Nothing stands in its way once the decision has been made.
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Interesting comments TOF/2nd/Jesse/CC...Man, makes the head spin. hmmm....
ReplyDeleteWTF. I just read jesse's take. Well, I would say a black swan can fly north or south- volatility should spike on a 250-point gap either way.
ReplyDeleteJust finished reading all the comments from today -really good discussion.
ReplyDeletethe other big plus for the markets this week was Warren Buffet's piece in fortune basically saying bonds are trash. Buffet is not the best trader around; but he is one of the very best on long term valuation calls and he is most certainly right again.
think about all the money that's gone into bonds the last few years. When this money comes out; it has to go somewhere and equities will be the place. This will drive a ton of demand and psuh stocks up.
I agree with tof's comments re gen-Boom. It will take another multi-year Birinyi rally to save our hides. And we likely get one. Financial blogs are the present-day version of the civil rights bull sessions we had in the sixties.
ReplyDeleteThe next rally may even exceed the one that began in '42? Boomers have always done things on a grand scale.
ReplyDeleteAnyone hear from Altucher lately? The dude had it right last summer, staying bullish when everyone was calling for a crash.
ReplyDeleteAltucher? I'm pretty sure he's writing about hookers or how he went mad in the summer of 87.
ReplyDeletehttp://techcrunch.com/2012/02/11/dont-call-me-a-douchebag/
Ok I'll admit it...today was a major struggle for me. After seeing Jesse's posts I searched high and wide for signs that I should be bailing. I then did a major mental inventory which consisted of the following questions:
ReplyDelete(1) Am I really a buy and holder?
(2) Do I have the stocks that I want to buy and hold?
(3) Do I have the stomach to just sit and watch my stocks go up and down?
(4) Is WFR at risk of going bankrupt?
I had to spend about an hour just analyzing each of my holdings and finally came to the conclusion that these all have the potential to rise significantly should the economy continue to grow (in the case of IMMR, should they win just one of their potential lawsuits against the big cell phone companies) and so the real reward will be not from trading my way to riches but rather from just sitting and doing nothing.
Hmmm...Very interesting introspective TOF. I do that all the time on a smaller 'front'. I will say though, I'm surprised by your conclusion.
ReplyDeleteBTW, a side benefit of blogging is spelling. I actually got introspective right the first time!
Man, in a fraction of a second this just came to me...You know when your right, it's because if your wrong, your OK with that. That's how I felt building a large position in MITK @ 7.
ReplyDeleteMark - this is something I'm getting better and better at mastering. I do this mental exercise every time I buy something: well, if I'm wrong I will know it when the stock drops to $X, at which point I will sell and take the hit. And if this happens I can stomach the hit. Typically, if I can convince myself of this before taking on the position, then the odds of me not getting shaken out are quite high.
DeleteOn the flip side, I have definitely NOT mastered the art of when to sell if I have gains. I don't particularly enjoy selling in piecemeal because once I have made up my mind to sell something I want nothing to do with it. It's kind of like an old girlfriend. I have no intentions of half breaking up with her if I'm done with her mentally.
That second paragraph makes me question you earlier comment about LT holds.
DeleteCatch you cats in the morning.
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DeleteBut what if the girlfriend isn't interested in you anymore either, but wants to pay you to see her everyday but without talking to her. All you have to do is see her picking up the newspaper on the driveway each morning while you get in the car to go to work. Let's say she has gained a bunch of weight and for some reason you're not attracted anymore, but you still see her once in a while and she picks up a hot pair of Ugg's, loses weight and gets a boob job and has a hot RICH friend she wants to hook you up with because the friend is hot on you and they both want to do you. There are ways around being mentally done....
DeleteThe money is in the long term holding and waiting. You don't have to do anything, set stops and move them up as it moves in your favor, set it and forget it.....while you date the girlfriend. Let the market decide when you get out. There is really no way for a person to know that.
BB - Another asset class that is bound to bring people to equities: precious metals. I think they're done. It was a great 12 year run.
ReplyDeleteIf there is one asset class that I would short it would be gold. Sorry for you PM guys but let's look at what has happened in the past 6 months (since Gold peaked):
ReplyDelete*Market rallied 25%
*Europe, Japan, and the US all added stimulus
Yet gold is down about 10% in that time frame. And it has made a series of lower highs. Warren Buffett is right:
http://finance.fortune.cnn.com/2012/02/09/warren-buffett-berkshire-shareholder-letter/
On buy and hold, though, I think it's always wise to pay attention to how your investments have done and what other opportunities are out there. If your holdings have risen rapidly in a short period of time and your ultimate goal is say another 25% yet you find a business like like what AUMN or IRE or NLS was at 2 months ago and it clearly has more upside than 25%, then moving money into those clearly makes sense. So buy and hold could just be going from long one asset to long another.
ReplyDeleteBy the time I wake up TOF will be a buy and holder for 3 1/2 Hrs. max.
ReplyDeletenowadays it takes me 2 beers to change my story so you could be right.
ReplyDeletei am proud to say, though, that my holding period on my first batch of NLS is approaching the one month anniversary, which is pretty impressive for me. i'm channeling my inner 2nd.
you guys gotta catch steve martin on conan the other night. dude is still on top of his game.
ReplyDeleteSome recent tweets from Steve Martin:
ReplyDelete"Found small Chinese person inside my iPhone. Apple needs to address working conditions."
"Don’t forget to give your Valentine a real hearty handshake today"
"Had a good relationship with audience in Reno tonight. They were in seats and I was on stage. Nice balance."
"Commerciality ruining this year's Superbowl ads."
"The cops have put a tail on my dog."
TOF, I agree re the PM's and probably all the metals.
ReplyDeleteThe gold guys will say how can gold go down with so much money being printed and inflation around the corner, but reality is gold did poorly through the 1980's when Regan was president and running huge deficits. Gold did well in the 2000's during a period of low inflation and modest deficits at the start of the decade.
The 2000's gold bull was really about supply and demand. Miners did not build mines for 20 years as the price of gold kept going down and central banks kept selling. When the central banks stopped, there was a supply deficit, so prices started rising, ETF's added to demand, the supply response in mines is a long time, so we had a great bull.
The other thing that is interesting about the PM market that we've never had before is you now have PM ETF's holding huge amounts of the metal. In the past, people had gold in safety deposit boxes, etc. and it was hard to sell. This time it will be easy, so drops could be fast.
ReplyDeleteTOF,
ReplyDeleteBuy and hold does not mean just buy 5 stocks and forget about them You still want to be constantly monitoring their progress and looking at new stocks and comparing these against your 5 and upgrading your portfolio on an ongoing basis. As the economic cycle progresses and stock valuations change, you want to take advantage of this.
Even Buffet said he made a mistake not selling Coke in 2000 when the valuation got so high.
Reading Landry's book. I'll throw out passages that jump out from time to time, along with my own comments.
ReplyDelete(a) Stocks trade on emotions, not reality. OK, we know that. But we tend to forget that. (What is reality, anyway?)
(b) Trend following works, and those to whom Landry has taught the method are almost always instantly successful. Then human nature takes over, and they try to outsmart the method. For instance, they start trying to call tops and bottoms, which results in entering before a trend begins, and exiting way before it ends.
Uh....guilty. I still tend to micromanage positions.
DeleteI also try to scale into positions, when in hindsight if I just bought full positions on the trigger and held them until the PT I would be even more successful.
There are times to use discretion (the last chapter I think) where a position goes parabolic (or the reverse) and you have to decide if you want to lock in some of that type of move. In the case of a huge move with a full position but not quite reaching the price target or with the 'second loaf' that makes a serious, but unsustainable parabolic move.
The hardest part is buying a full position (all at once) and then sitting and patiently waiting as it turns against you for a little while, maybe even a little under the stop, then reverses and skyrockets.
The methodology requires discipline, but the risk/reward is really well defined. So far I would say the ratio is maybe 7 or 8 out of ten do exactly what you want and if you use stops you make money as intended.
I will also say the method has a margin of safety that may make you late on trades (discretion again) but keeps you out when you should be out. The methodology requires a trend, a pullback and the ability to recognize one or more patterns. It's good to get really good at one pattern (lately we have had a lot of my best pattern, transitions off the bottom with trend knock outs) and make a load of money on one good pattern.
I say this for 2nd because as long as I've known him he has been really good at sentiment trades and these tend to be that pattern, just early. Pullback trading is good, until it isn't, that's why it's safer to wait for the trend resumption. Trading a pullback that turns against you is mentally destructive, it is hard on the confidence so vital to trading.
I will mention a certain IRE position last week as an example of (b) above. Exiting before it ends. I know because I'm very guilty of this one. :>)
I do that all the time thinking it will pullback and I will re-enter lower, and what happens? The sold position goes higher and higher and higher without me.
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