Monday, May 23, 2011
05/23/11 Youngstown
The Deer Hunter begins along the Monongahela somewhere south of Pittsburgh, and closes 9000 miles away somewhere along the streets of Saigon.
This bull market is taking a hit- one which may at some point take the SPX well south of 1300. But you know it ultimately ends far north of the DMZ.
We cool, right?
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we cool 2nd...i'm fully prepared to see MITK at my purchase price of $5.45...knowing that it will be up multiples of its current price.
ReplyDeleteThat's what it takes, man. Faith and guts. 90% of investors think they have the former, and 99% of traders think they have the latter. 50/50 is more like it.
ReplyDeleteIf that's our destination, then hold onto the 'ol dashboard with both hands! ;)
ReplyDeleteMinor setback, CP. Quit tripping, dude.
ReplyDeleteThe Falun Gong is suing CSCO.
ReplyDeletehttp://tinyurl.com/3npdk7r
What's the world coming to?
ReplyDeleteFirst we have every ambulance chaser in the country suing small businesses for failure to provide access to disabled patrons (including the 99% which never received a complaint from a disabled patron).
ReplyDeleteI seem to be posting a large number of percentage figures recently.
CP- GMO is one of those companies that will 'quietly' hit double digits while the rest of the investing community is tripping over LNKD.
ReplyDelete"This bull market is taking a hit- one which may at some point take the SPX well south of 1300. But you know it ultimately ends far north of the DMZ."
ReplyDelete*Ultimately* is the key word here, 2nd_ave. I don't doubt that S&P will be above $1400 in 7 years. The problem is, that will happen with many MAJOR drawdowns in between (and we may very well be starting one of such drawdowns now). So I see no problems with buy-and-hold in general, but the particular implementation, in order to be really profitable, MUST scale the initial investment according to initial valuations (investing a smaller part of portfolio when valuations are rich as they are now) and leave a lot of spare cash to keep adding to the initial investment in small chunks whenever the inevitable 20%+ drawbacks occur. Otherwise, it is REALLY hard to keep faith and stick to your guns, seeing a 20% pullback and not being able to do anything about it (i.e., tell oneself that it is in fact is a great opportunity to add to the initial position).
Are you sure that YOU will be able to keep all your money in the buy-and-hold mode as the market experiences a 20% pullback with all the accompanying news stories that make a very convincing bear case? Or is your current plan to do buy and hold until the market drops by 10% but then switch into a "capital preservation" mode and then bail?
2nd - it's amazing how often that happens...i.e., when traders become so focused on the minutia of every little thing that is going on the world, ready to bail after small up moves or get stopped out after small down moves, that they end up dropping the very winners that will make them rich. i've personally done it so many times it makes me sick. the one big winner i missed: GMCR. my friend / old boss put all of his money into it back in 2004 at around what is now $1/share. i looked at it and put about $10k into it. i made about 10% and was satisfied. he made about 50% and was satisfied as well. he tells me about it all of the time...how he got scared out of it when it went sideways for 10 months and he was thinking he might lose all of his gains. it's up 40 fold from when he bought it.
ReplyDeletethe hardest part is being mentally ready for the market's moves / individual stock's moves.
2nd -GMO- Yes, and copper was doin' the swan dive once again today. Of course the data from China indicates a substantial slowdown for good reason, they want to go shopping for natural resources and what better way to get excellent prices other than by publishing bearish data? Add that to the Indian saga along with the same old story from Europe that keeps getting recycled....
ReplyDeleteThere's really only one rule to remember: over long periods of time, the market moves UP.
ReplyDeleteDavid- That's what self-imposed imprisonment is all about.
ReplyDeletepeople forget that while the japanese market moved down for 20 years, plenty of individual stocks moved up.
ReplyDeleteOnce in awhile, it moves DOWN. Sometimes, in a big way! But the smart (high odds) bet is always UP.
ReplyDeleteIf we include dividends, how does that alter the picture?
ReplyDeleteIn fact, at one point in 2009 I posted a story about a market timer who led the field holding cash since 1981!
ReplyDeleteI don't think he stayed at #1 long enough to celebrate more than one Sunday dinner with the family.
"David- That's what self-imposed imprisonment is all about."
ReplyDelete2nd, you didn't answer my question: what is your COMPLETE PLAN? Are you planning to bail if the market drops by more than a fixed percentage or are you planning to hold no matter what? As Bill likes to say: "Plan the trade and trade the plan."
David- Buy and hold means buy and hold! My plan is solitary confinement. A trading that plan requires disciplined inaction.
ReplyDeleteWill I bail if the market drops by a certain percentage? Let's see how it goes.
Plan the trade and trade the plan? That's not me, bro. You might as well say, 'Plan your four years and graduate on time.'
What often happens to the best-laid plans?
Look, the trading world is full of truisms. Sometimes, they're actually true.
ReplyDelete2nd_ave, there is a mathematical fact, as popularized by J.L. Kelly, which states, in its simple form, that if you assign a probability P of today's close being the lowest point for the next 1 year in a particular stock, then you should invest (2P-1) fraction of your portfolio into that stock, in order to maximize your long-term returns:
ReplyDeletehttp://en.wikipedia.org/wiki/Kelly_criterion
I suggest that everyone here reads the above Wikipedia article and ponders about it.
So, 2nd_ave, your current all-in position is appropriate only if you assign a probability of 1 of today being the lowest point for the next year. Otherwise, you should free up some capital so as to add it as the stocks pull back and the potential upside increases. That's what Hussman was also saying -- one should be more "long" as the valuations become better (i.e., as stocks move down).
David- The problem with the Kelly rule is the assumption that human behavior can be explained by mathematical models.
ReplyDeleteBuy-and-hold may in fact maximize an individual's portfolio returns NOT b/c he averages down in the mathematically most beneficial manner, but simply b/c it keeps him from bailing.
In other words, it's a BEHAVIORAL model, not a MATHEMATICAL model.
David- I'm pretty sure you didn't marry your wife only after consulting eHarmony's 29 dimensions of compatibility ')
ReplyDeleteYou guys know why crude pulled a sharp u-turn?
ReplyDeleteMOG's crude take from here. 85 floor, 115 high, 105 EOY.
I want answers please.
ReplyDeleteMark- It's probably b/c it was headed down the wrong freeway and wanted to turn around.
ReplyDeleteWorks for me if that's the case :). I did my part this weekend to shrink gas storage levels.
ReplyDeleteFor some reason, I am a little annoyed the market seems to rely on crude prices the last week or so.
ReplyDeleteLooks like the EOW guy is revising his prediction to OCT. 21.
ReplyDeleteMust be an Elliot Wave dude.
RB - I don't get your bearishness on gold, but I think if you wanna go short at $1600 that's a good entry. PM's are a pretty small market, and as currencies vault up and down the weary crowd is going to migrate over to something that consistently seems to keep going up as opposed to something that gaps up one day then gaps down the next.
ReplyDeleteWho really cares what it is as long as it can be traded?
David - I can dig the Kelly criterion, absolutely.
ReplyDeleteOk Mark, heres my take: Look at a chart of $WTIC and then a chart of $WTIC:$USD. Identical patterns from the May 2 peak to now. Crude follows inversely to the dollar. I think the $ is in an intermediate term up trend. Longer than that I think it is crap.
ReplyDeleteMark - U turn? USO closed down over 2.5% and left a nice open gap. I'm not sure if gaps really count for a commodity that trades continuously though...
ReplyDeleteAnyway, what's amazing to me is I thought I had detected Obama slapping around the Arabian aristocracy last week and this week oil falls, rather the opposite of what I'd been anticipating...
Furthermore, look at each of the above charts in terms of EMA's daily 20/63/200. Observe that the IT 63 has been penetrated and crude is now moving sideways. IT 63 is resistance at $102.37. (Actually the 20 day EMA is coming into play as first resistance now at a very close $102.26.) Long term EMA 200 is support at $93.42.
ReplyDeleteThen remember, the $ is crap, the Euro is too, the Mid-East is in turmoil and US production continues it's long decline.
"crude take from here. 85 floor, 115 high, 105 EOY."
ReplyDeleteSeems like producers should be making money under such conditions.
Toshiba (Owner of Westinghouse nuclear) announced today they are taking a 1/3 position in a South Korean wind turbine manufacturer, and a large stake in a US-based geothermal exploration company.
ReplyDeleteI heard this on NHK Japan this afternoon, so I don't have any links to share.
CP- I was talking about the action after the close.
ReplyDeletehttp://www.screencast.com/t/K0uoqu7waT
That's a pretty big move for the time of day.
Illini- Yeah, no doubt. The correlation will break down at some point. It always does. That's why I commented that I was annoyed with it.
I also should make it clear, the price of crude is an underlying issue for me. Right now most analysts are using about $80 for liquids in their target pricing. BEXP is the best liquid play I can find.
ReplyDeleteBEXP's median price target I can find is about $39 at $80 liquids. Bump that to Mog's mean of say $90 and those PT's should move to $45.
If I can get out of BEXP for about $38-39/share, I'll make about $40K on this trade. ($9K is already in the bank.)
Mark - "I was talking about the action after the close."
ReplyDeleteOkay, what precisely is it you're trying to say that you're not getting out? I'm beginning to think you're wondering why the price went up or down at some specific time or another.
I'm kinda tired and ragged, not really in the mood to be guessing and drawing at straws but whatever you happened to see I hope it was encouraging. ;)
CP- Did you look at the link I provided? Anyway, no big deal. We'll see if it lasts. Might be in account of the raids on Tripoli tonight.
ReplyDeleteCP I am just making life interesting on that other board. As i have said before I pretty much ignore the precious metal market.i just know enough to piss people off. The most interesting thing is I got the great Kaimu to admit he liquidated his mining positions to invest in an internet company. I will be holding that trump card if they get real nasty with me.
ReplyDeleteMark bad news some analyst at JP Morgan says oil at 135 this year.Analysts are always right!
David, 2nd and Team stop all this buy and hold BS and buy some TZA. I'm like WTF.
Here is the problem graphically since May 2 showing that USO has dropped much more than UUP, GLD, and SPX.
ReplyDeletefinance.yahoo.com/echarts?s=gld#chart12:symbol=gld;range=20110502,20110523;compare=uup+uso+^gspc;indicator=volume;charttype=candlestick;crosshair=off;ohlcvalues=0;logscale=off
When I tried my link it reverted to a one day comparison. You can easily manipulate it towards a May 2 comparison using the graphic scroll bar towards the bottom, going left.
ReplyDeleteUSEG - There's the 5% loss you were looking for, seems it came pretty quickly....
ReplyDeleteBEXP - What are the dynamics, is oil piling up on tanker ships and in ground storage?
Mark - Yes, of course I took my time to download and review the chart you posted, why is it so damn difficult to ask a straightforward question in the first place without having to play 20 questions?
ReplyDeleteHow frustrating! Never mind, I suppose this is going nowhere as intended...
RB - Dr S has you all wrong. Thinks you are a swamp turtle when you are the road runner.
ReplyDeleteCP- Yep, USEG is a complicated play. Lot's of parts in that one, including a apartment complex for some fucking reason!
ReplyDeleteBEXP- I don't know my friend. I've never worked so hard on a position in my life, and MOG's take seals the deal for me. You can't ignore their drilling results and the land/permits they hold. Crap, check out the Yahoo message board for better info than I can supply. I'll gladly hang out in MOG's back pocket.
I would like to again confirm my death wish by an earthquake instead of a tornado. I've seen the real time video of the cow getting sucked up in one of those suckers. No thanks. I'd rather be crushed to death.
CP- Hun? Must be an internet thing. I was wondering why the sharp reversal in crude. It was in a down trend most of the day and picked up speed after the close. Down 1.4% after the close and now up .87%. That's a pretty sharp snap back.
ReplyDeleteI'm still guessing it's related to the news from Tripoli. Maybe they bagged that Fer this time.
RB - I really can't stand to pay too much attention to folks who are too afraid to post their trades in realtime or their plan ahead of time, anything else is just a load of BS and worth about as much as a 20min delayed quote.
ReplyDeleteKaimu can jump off a cliff bless his soul if he can manage to locate one(figuratively speaking, of course), he lives in the jungle on an island for crying out loud. If that's not one muddy step minus a rice paddy or two from Apocalypse Now, I don't know what is.
When he tells me a bloody lobster dinner should cost no more than $0.50, it's easy to see his equation is missing more than a few variables. When he says he has to pay more than ever for shipping flowers by aircraft I wonder why his customer isn't paying for that himself. IOW, Kaimu is half FOS, IMO! The first clue comes when as you say he can't fully commit to his thesis, remember when these guys were railing daily against Bernanke's corrupt FED? WTF, over!
I can just as easily say that if Ben had done nothing, gold would probably about $0.50 by now, handgun ammo would be $1500. Gasoline would be unobtainable and the White House would've been burned to the ground.
Man, that tornado was really something. Must be due to global warming.
ReplyDelete"news from Tripoli."
ReplyDeleteOkay, I wouldn't know what that could be, my TV sits in the other room and is off(hey, at least I'm honest). Last I saw over a week ago Gadaffi Duke had blown up most of the Libyan oil infrastructure and bombed the oil ports.
Our defense industry is so overpaid, I guess I'm gonna have to fly over there and shoot him on the head myself.
Global warming - You guys in Cali miss out on all the fun, but there's no need being jealous! I'd kinda think about having my own water well though, they're nice to have.
ReplyDeleteAnyway, as we used to say in Texas, if you don't like the weather right now, then just wait a few minutes... You Cali guys just wouldn't understand a concept like this, we wouldn't expect you to...
Get a rope! ;)
JOPLIN, Mo. • Rescue crews dug through piles of splintered houses and crushed cars Monday in a search for victims of a massive tornado that killed at least 116 people when it blasted through this town and slammed straight into its hospital.
ReplyDeleteIt was the nation's deadliest single tornado in nearly 60 years and the second major tornado disaster in less than a month.
Authorities feared the toll could rise as the full scope of the destruction comes into view: house after house reduced to slabs, cars crushed like soda cans, shaken residents roaming streets in search of missing family members. And the danger was by no means over. Fires from gas leaks burned across town, and more violent weather loomed, including the threat of hail, high wind and even more tornadoes.
From STLToday.com Also today:
ST. LOUIS • A rapidly moving storm sped through the region around noon today, dumping rain and hail and knocking over trees and power lines.
Ameren Missouri reported about 60,000 customers on the Missouri side of the St. Louis area were without power about 3:30 p.m., down from a peak of about 68,000 just after the storm. About 11,000 Ameren Illinois customers were without power. Emergency workers were dealing with reports of limbs, trees and power lines down throughout the area.
CP, Speaking to the choir brother.
ReplyDeleteWow i thought they were talking about last months tornado. 116 people! Unbelievable.
ReplyDeleteillini - That's quite a storm, I often wonder if increasing population density has something to do with frequency of these types of events.
ReplyDeleteSimilarly, I guess sometime in the 50's cancer death rates began rising rapidly as physicians were learning about the various forms of the disease.
"Buy-and-hold may in fact maximize an individual's portfolio returns NOT b/c he averages down in the mathematically most beneficial manner, but simply b/c it keeps him from bailing."
ReplyDeleteWell, if buy-and-hold mentality is the best way for YOU to keep yourself from bailing, then maybe it is the best approach for you. However, even in that case I would have waited for a serious market pullback before initiating buy and hold. You yourself once said (that was a few years ago, but I still remember it as one of your wise market observations) that you want to wait for a pullback entry to have a lower risk of a drawdown AFTER your entry, even if that pullback occurs after a significant rally and bottoms out at a price that is higher than the current one.
For me, personally, the best way not to bail from a position as it goes down is to say to myself that my position was smaller than what I ultimately desired and I should ADD as the price keeps going down, so as to lower the ultimate average cost of my FINAL position.
"David - I can dig the Kelly criterion, absolutely."
ReplyDeleteI know you dig it, CP -- you totally believe in GMO but only have 1/3 of your port invested into it. With such an attitude, you will INVARIABLY succeed. Let's contrast it with the mistake (IMO) that Cheapy made with RBY -- he believed in it and went all in at $5+, even though I was telling him that RBY is a volatile stock and will have plenty of major pullbacks, so it would definitely be wise to leave some money in cash so as to ADD on each such pullback (and sell on a rebound).
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ReplyDeleteCSCO - Someone should go over and stake out the place to discover if everyone there is busy or if they're just sitting around doing nothing all day.
ReplyDelete