Friday, July 13, 2012
07/13/12 Key to the Highway
What seems to work best for me:
(a) Dive into the heads of investors as best I can. Immerse myself in their point(s) of view to the point of emotional engagement (hence my use of phrases indicating strong conviction in market direction, with frequent reversals backed by equally strong conviction). My take on market direction will generally run counter to prevailing sentiment.
(b) Fade the crowd. Occasionally the fade works immediately, either within the same trading session, or at the open of the following trading day. Due to the frequency/magnitude of reversals lately, I've lost my usual willingness to give the trades time to unfold. I probably need to give them a longer leash, certainly beyond the one hour to one day I've been using.
(c) The three-day (t+3) settlement is a serious handicap. Perhaps the best way around it is to limit all trades to 1/3 of funds available. Being an all-in or all-out kind of guy is a disadvantage (of course, being all-in pays off beautifully when fades work immediately). So I'll need to rein in expectations of potential gains to 1/3 of 'all-in.' I highlight the previous sentence to emphasize the enormous impact of expectations on my psyche.
More to follow, so check back for edits.
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T3D- OK, I'm off for a ride but will check when I get back. I'm pretty sure there were some articles in Seeking Alpha posted here.
ReplyDeleteThanks Mark, but I'll just check out Seeking Alpha myself no need to take up your time.
DeleteHave a great ride.
http://www.youtube.com/watch?v=xt0V0_1MS0Q
An intelligent, easy-to-understand synopsis of the challenges facing corporate profit growth from an economist with decent cred:
ReplyDeletehttp://www.marketwatch.com/story/perils-of-a-corporate-profit-slowdown-2012-07-13?link=MW_story_latest_news
I'm starting to feel good about last week's 'failure to capitalize.' As long as the failure results in tweaking of my approach for higher future gains, it's all good.
ReplyDeleteMAKO - Here's one we could try playing...
ReplyDeletehttp://finance.yahoo.com/news/james-carville-middle-class-hit-003512805.html
ReplyDeleteI think his 'it's the middle class, stupid' point of view is one that will start hitting the headlines soon. The average Joe wants jobs, affordable health care, and affordable college tuition. All reasonable demands.
Dudes - I'd encourage you to read this article:
ReplyDeletehttp://searchengineland.com/google-product-search-to-become-google-shopping-use-pay-to-play-model-122959
The implication of this is HUGE for every retailer in the world. It is the reason why GOOG should be bought hand over fist if you're looking to make a low risk, sound investment that will not make you rich overnight but pretty much guarantee that you will make money on your investment over the next few years.
Google has officially changed its strategy on Google Shopping to a paid service. This is HUGE NEWS. I don't know of any retailer that will not be willing to include their products in Google Shopping, regardless of having to pay for it. It has been free for 10 years now and the number of merchants on it is staggering.
In my opinion, Google has always been the most important thing to come along over the past 20 years and it is the lifeblood of millions of websites. The fact that it's worth 1/3 of Apple is shocking. I believe within 5 years Google and Apple will be vying for the largest market caps in the world. So that means either Apple falls or Google zooms higher. I think it's the latter.
Fundamentally, Google is extremely sound. $180 Billion market cap, $50 Billion in cash. $12 Billion free cash flow. Trades at 15 times free cash flow or 10 times if you exclude cash on hand. Last year they increased expenses heavily as they put a lot of money into rolling out mobile and other services like Youtube. This weighed on EPS but it will pay big dividends in the future. Especially as they move to a Netflix / Cable TV like service on Youtube, become the biggest force in mobile computing, and start charging for all of the free services they have been providing to merchants over the years. EPS is expected to be in the low 40's this year (meaning it trades at like 13 times earnings. Again, back out cash and you're talking 9 times earnings. Think about that for a second. If you want a sure thing over the next 5 years, something that might not make you rich but will make you a good deal wealthier and won't go down in value, then GOOG is the play. The best part is the weekly chart is setting up for a buy right now.
Some of these big cap stocks consolidate their gains over a period of a few years then vault higher. BIIB is one that comes to mind. WMT is another. GOOG is growing faster than those two so I think the consolidation phase is over. I expect it to double in price over the next 12 to 18 months. Within 5 years I think it will be worth at least 3 times its current price.
Bingo, I'm inclined to agree with all of the above.
DeleteI also think YHOO could turn things around, but apparently they have some security issues that may turn out to be bad news?
DeleteYHOO is cheap and probably will be a good investment, but GOOG is the best in breed and a sure winner. I really hope I can make the plunge into an investment like that. The peace of mind of knowing that they will be significantly higher over the next several years would be nice...it would free up time otherwise spent researching stocks.
DeleteGoogle’s Nexus 7 Is On FIRE!
Deletehttp://wallstcheatsheet.com/stocks/googles-nexus-7-is-on-fire.html/?ref=YF
Another reason to buy GOOG? I think so.
Student Loans - Is it true that total of student loan is larger than consumer loans? I recall reading something like this not so long ago...
ReplyDeleteJohn Mauldin on the future of USA:
ReplyDelete"The US will have an election this fall, in part to determine how we deal with our own debt issues. If we get the deficit under control (on what I call a glide path to a balanced budget), and couple that with tax reform (see, I really am an optimist), we can avoid becoming eurozone Europe. That implies a much lower growth rate for much of the rest of the decade, for reasons I have written about at length (and that we cover in the book); but we should be able to avoid hitting the wall. If however we avoid the issue, we will turn into Spain faster than you can say spit. It will not be pretty. Ours will be a different type of depression than Europe's, but a depression nonetheless."
Seems that might lead into shorting the DVY ETF?
Deleteevening gents, back in texas, oregon was pretty hot for a few days but at least it wasn't as humid
ReplyDeletebot some more LEN hoping for a bounce on wed or thur, i don't remember which, got stopped out so not holding any LEN at the moment. My stop was around 29.72 which I'm happy to say was just above the low of the day last thursday, right before it moved on up to $31.00. Just have to keep pluggin away.
DOW is paying a 4.22% divvy at current prices, hmmmm
ReplyDeleteMy brother said he though last Friday's rally was due to some FED commentary and China easing. I was too busy enjoying my last day in the northwest to notice.
ReplyDeleteLooking at the weekly SPY chart, to me it looks like we are just bumping upper resistance around 137 in a rangebound market. I would think some properly placed central bank commentary or action would send us rallying. For some reason it feels a little early for that. So far it looks like the volatility this summer is a lot less than the last two summers.
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