THIS DRIVES ME NUTS
There are a few things I come across every single week that make me question the brain capacity of human beings as a functioning organism on this planet. Reality television and driving through Los Angeles (same thing?) are a couple that come to mind immediately. I came across one today that made me shake my head and sent my brain racing. As soon as I heard it, I imagined what a luxury it would be to have a chauffeur so that when I get these sparks of creativity caused by anger and frustration, my driver could deal with traffic and I could just machine gun the keyboard. With no chauffeur in site and none on the hiring docket, I was forced to wait until now to unleash. I heard a gold commercial on a talk radio station this afternoon. The radio host was plugging a gold company and it went something like this, "24 out of 24 analysts say that the precious metal market is set to appreciate by X% this year". I can't remember the rest of the commercial because when I heard that part, I saw white and just stopped listening. My brain completely shifted direction and I started having visions of middle class families getting decimated once again by yet another bubble trend that has reached the point of maximum inflection. Custom tailored, curve-fitted analysis has reached a juncture where it is driving prices beyond anything reasonable, causing this self-reinforcing cycle of completely deceptive marketing to litter the airwaves. I see Cash4Gold signs on the back of rundown buildings that are facing the freeway...saw one today, in fact. "24 out of 24 analysts say that the precious metal market is going up by X%". Are we really that dense as a population that we can't remember the details of our previous torturous financial episodes? Do people not see that whenever any group of "experts" are all lined up on one side of the ship that ship is on its way to the museum under the sea? - The internet bubble - 24 out of 24 analysts were expecting gains from 2000 and beyond. Investors closed their eyes, took a leap of faith. Investors were left with a worthless stock certificate to Pets.com and an investment account that couldn't buy them a ticket on Greyhound. Result - Congressional hearings. - The housing bubble - 24 out of 24 analysts were expecting housing to continue double digit growth well past 2010. Investors closed their eyes, took a leap of faith. Investors were left with an upside down mortgage, the rules of which might as well be recited to...
GOTTA “BORN TO LOSE” TATTOO?
It's all about the losses. I know, I'm not telling you anything new. Everybody realizes that the financial markets are all about controlling your losses, yet 90% of people who do this lose money. It's one thing to know and another to be able to implement what you know. Just as with anything else in the financial markets, there are a million different ways to control your risk. And just as with all other things in the financial markets, you must discover the method that best fits you and your psychology. If, for example, you are a guy who never leaves more than a 10% tip and has a case of Two Buck Chuck in your garage, then a strategy involving close stops that makes your broker rich is probably not the best strategy for you. As with anything, it's important to find what you are comfortable with...not what some guy you read about in a book has done to accumulate his fortune. The better your research and entries into trades, the more high probability those trades should be. There are so many out there who enjoy the rush of being in a trade so damn much that they don't care about the probability of success. If they are out of the game, they feel as if they are missing the train. Truth of the matter is that being in the game constantly with new trades and ideas only further prolongs your misery, as your batting average for successful trades will consistently decline as your frequency of trading grows. Our philosophy...why bother? We only take on a handful of well-researched investments each year. You know what that means? It means that over the past year, we've only been forced to take losses on two of our investments. We took a .03 cent loss on a .35 cent stock recently. Yep, we gave up .03 cents or about 10%. But guess what the result of our GSIG investment was, as just one example? A total gain, with all purchases taken into account of just over 200%, and we're still holding a small portion. Not a bad ratio of winner versus loser. Here's our take on risk control: 1. Do your research 2. Be extremely selective about where you put your money 3. Don't jump around the financial markets like an addict looking for his next fix 4. When you find an investment that works, don't be afraid to allocate heavily into that investment. Diversification was invented by a duo named LarryDiversi and Johnny Fication, both of whom did terrible research and overtraded. It's unnecessary to follow their path if you...
SO, WHERE DID YOU GET YOUR DEGREE IN CURVE FITTING?
This article also published on thestreet.com and fidelity.com Wall Street is the world's greatest venue for deception of the monetary variety. A wealth transfer mechanism that is perfectly shrouded behind fancy degrees, expensive suits and men who coach little league teams on the weekends. The talents, you're told, come in all shapes and sizes. There are those who can rip through a companies books and figure out exactly where the stock should be priced. There are those who are able to look at bond spreads and figure out where the economy will be in the years to come. There are those who can read the tape so well that they rarely have a losing week. The truth of the matter, contrary to what the general public believes, is that Wall Street is largely a talentless fraternity of overpaid men who are nothing more than masters of curve fitting. They look the role, they have documentation (degrees) to support their part in the role and they speak the role with abundant confidence. What is lost on 99% of people is that it's all hollow...an act...a drama, played out for the investing population so that they can keep feeding the machine. Those massively intellectual decisions that fund managers and analysts make on a daily basis are rarely anywhere near what you are led to believe. The truth of the matter is that Wall Street is dominated by curve fitters. What do curve fitters do? They fit their research around momentum driven moves in the markets. Trends, if you will. They rarely discover unique ideas. They rarely make moves at the beginning of trends. What they do, instead, is take a momentum driven move or steady uptrend in the market and tailor fit a set of data around the price move. Read it again, they take momentum driven price moves and tailor fit a set of data around the price move. Trend-followers that curve fit data in order to intellectualize their decision beyond "it's going up and I want to be a part of it", that's what Wall Street is. You can't have that guy in a $2,000 suit, a degree from Wharton and a pound of hair gel telling a group of high net worth foreign investors that I am buying this stock because it has a lot of momentum and the trend is up. You have to act out the drama for them. As a Wall Streeter, you have to play the part, the lingo, the look...you must make these people feel as if they are sitting courtside at a seminal event in financial history. You must give them such...
THE TOP 3 MOST POPULAR POSTS FROM THIS PAST WEEK
1. I USED TO RICH 2. THE GOOD OL' BOY NETWORK IS ALIVE AND WELL 3. INCREDIBLE HULK AND A TOPPY MARKET - LOTS TO BE LEARNED
TOP 3 MOST POPULAR CHARTS FROM THIS PAST WEEK
1. AAPL - DAILY CHART FROM 2/10 - BEARISH 2. GLD - DAILY CHART FROM 2/6 - BEARISH 3. SOX - DAILY CHART FROM 2/7 -...
A PATTERN THAT REPEATS TIME AND TIME AGAIN. LEARN!
As Egypt erupts into celebration over the resignation of President Mubarak, let's revisit a chart pattern that was colored, primped and groomed as a result of the conflict in Egypt. The chart below is from January 31st: (click on chart below to enlarge) You see this type of pattern time and time again in the market. It's called the PME pattern or the Pre-Mature Ejaculation pattern. What is it? Well, look at the chart, do I have to say more? Oil, more or less, had an accident in its pants as it was rounding 3rd base for homeplate. The participants in the oil market got so excited, worked up and hot over the Egyptian crisis that they didn't even get the chance to take their pants off, it was already over. It happens all the time, and it's a great move to fade. All the volume and the sudden thrust up, as people just wait for their investment to pay off as a result of a crisis, event or play that is way too overly-telegraphed to ever prove profitable. The market never gives away its pot of gold that easily. A classic sell the news type pattern. The PME pattern...never has complete and utter disappointment and embarrassment been this...
THE 3 AMIGO’S OF THE NASDAQ
Here are the 3 amigo's of the Nasdaq. Let's look at these stocks individually to give us some clues as to what the market may have in store for us in the weeks ahead: (click on charts to enlarge)
JUST DON’T GET IT ON MY SHOES
The bears are nauseous. After today, when it looked like Cisco was going to force the Nasdaq into a retreat and it didn't work. Oh, you better believe the bears are having some gurgling of the stomach region. It's days like today that create the vomit-inducing type of give ups that are sometimes a requirement before a market can go about rebalancing or correcting itself before its next leg up. There isn't a potential long out there that isn't looking at this market after today wondering if it will ever go down the amount he or she wants in order to fulfill that feeling of not paying top price for a stock. It is, after all, more pleasant to shop when things are on sale. A great mentality when you're at Sears, shopping for some Wranglers on the day after Christmas. It doesn't work as good with the markets, however. And, you can be sure that every short seller of equities, at this very moment, is questioning every form of analysis, book, and mentor he or she has ever read or listened to. The game isn't supposed to be this hard, is it? Well, actually, yeah it is. It's supposed to be as frustrating, counter-intuitive and discouraging as possible to separate you the investor from whatever green you have in your life. Whether it's the front lawn of your house, your favorite green trousers or whatever is left in your wallet. Fleecing is the modus operandi here. Yeah, bears are at that point. How does that old saying go? When you feel like you're about to vomit, it's time to double up. You know, I have a story about that.........another...