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TheGarcipian (34.00)

Crash Must Be Imminent

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October 11, 2007 – Comments (12)

Something is definitely wrong in this world if I'm posting at #37 out of 37275 CAPS players and have ten (10!) little charm icons! A crash (ala Black Monday in October 1987) must be in the works, for I am always at the opposite ends of where the market is, or so it seems... I'm quite surprised that I've pulled up into the Top Fifty and so quickly, moving to #67 on 10/2/2007 from #103 the day before, then bumping around in the upper 50's to hit #34 yesterday and #37 today (with an intraday posting of #24 today, no less). Unbelieveable. And most certainly a sign that this market is overheated... heh.

Actually, over the past 1-2 months, I'd placed some bets on certain stocks (not in any particular sector), closed a few positions (CBL, BX and HL, in particular), and tried real hard not to fiddle with my virtual portfolio. Just letting my Accuracy rise a bit, and that's helped quite a bit in pushing me upwards. I don't think I'll ever get into the Top Ten because I've not been in CAPS as long as some of these other players, so their scores are much higher (which supports the thesis for more "time in the market" rather than "timing the market"), but mostly because there are some really amazing Accuracy scores out there. To wit, DemonDoug has an accuracy of almost 85% and StatsGeek has an accuracy of nearly 80% and over 160 active picks (and still he complains, rightfully so, about being wrong; I hate it too). That's astounding guys. Good work.

I've read complaints from people like PatrickCrawford1 about Accuracy and re-upping on your picks, especially when they are Thumbs-Down picks. While I agree on most of those points,CAPS is afterall a game, and I certainly don't begrudge anyone for trying to "win" the game (even it's myself!). Still, if I only "win" the game and learn nothing in the process, then I've lost, having wasted my free time (which I value very very much because there's so little of it). 

No, I want to make this CAPS experience a learning experience for me. So, yes, I will continue to pick Underperformers as well as Outperformers not so much for the points, but more for the Accuracy in the hopes that it will help me learn what to avoid out in the real world as well as what to buy (or short).

I am going to strive to pick more Outperforms and try to avoid being awarded the "dreaded" Skeptic icon, which I've not received yet--yippee!  Besides, I think picking Outperformers is the harder thing to do, but I certainly am not going to eschew any loser stock (symbol=PUTZ or otherwise) if it's screaming the lyrics to Beck's 1994 breakthrough song at me!  Furthermore, I'll also try to go Thumbs-Down on stocks that are above $5/share, to make it even more palatable as a true alternative to my real-world portfolio. No promises, but I will try...

Meanwhile, I've been so busy with my real world job that I've not had much time to dabble with my portfolio (virtual or real), so maybe this is a sign from the Market Gods: Don't Fiddle! 

It's either that, or they're trying to tell me the real ugly truth: you're a Contrarian Indicator and the market is really ready to plunge!  Don't say I didn't warn you!   ;-)  Happy Investing and good luck because we'll all need that "Good Luck" in the next few months... 

12 Comments – Post Your Own

#1) On October 12, 2007 at 5:33 AM, TraderMikeSays (74.06) wrote:

MySmartTrend.com has been posting about a rally clean through Thanksgiving, and I'm not about to give-up on it until I see some evidence.  With all this upside, I certainly believe we will have some pull-backs, certainly some downside, maybe even another correction, but a crash, a bear market?  I'm just not ready to jump on that sinking boat, yet.  I'll believe it when I see it.  I'm starting to hear a lot more naysaying, instead.  You don't sound like you believe in the rally, so therefore no bear, no crash, imo...  Still some fear out there making good buying ops.  But you're sure keeping us on our toes, though.

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#2) On October 12, 2007 at 11:11 AM, leohaas (29.28) wrote:

Trending123.com is bullish as well on many stocks and sectors. Technical Analysis apparantly shows a significant uptrend potential...

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#3) On October 12, 2007 at 3:44 PM, TheGarcipian (34.00) wrote:

Some of my above post was tongue-in-cheek (hope ya caught that), especially the use of the word "crash". That was more of a self-deprecating slam about my ability to UNtime the market and my astonishment at doing so well in this game...

No, I don't think we're gonna have a crash like that of Black Monday or the one in 1929 (mainly because of the provisions now in place to prevent or minimize such events), but I think we probably will have another correction. Bernanke's interest rate cut after Mr. Market's July 23rd jitterbug-step has made us all feel good (me included!) but it's only postponed the inevitable.  It's brought in many additional foreign investors to the US market, and helped some US companies with their large debt. But the housing woes are not going to go away. I'm thinking we've still got 6-9 more months for that to play all the way out. Maybe (hopefully) the interest rate cut will allow us a softer landing when the market deflates, which it will. At best, I think we may go sideways for awhile, which I'd be perfectly happy with as well.

This is not to say that we can't make money on many stocks and sectors. As you both pointed out, we can and we will (hopefully). But careful preparation and a watchful eye will be the hallmark of the successful investor over the next 6-12 months. Let the rising market raise your boat, but move up your stop-loss limits in lock-step. In times like these, I try to live by the motto: "Expect the worse. Hope for the best." 

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#4) On October 15, 2007 at 7:22 PM, darroj (27.98) wrote:

I always enjoy yours pitches and posts.  You do an excellent job of making things as simple as possible, which helps new investors such as myself.  I just started my real portfolio last week, all in ETF's, mostly foreign/emerging markets.  It does seem this upward trend is too good to keep going for long.  It's hard to say when a correction will come, but I'm a little nervous about it (as any young investor probably is).  With any luck, emerging markets will continue to grow, even if the US market has an adjustment. I haven't really read anything to say otherwise, so if you have any thoughts on that, I'd be curious to hear them.

-darroj 

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#5) On October 16, 2007 at 12:10 AM, TheGarcipian (34.00) wrote:

 

Hi darroj,

You have made the most difficult step already: starting an investment plan! Seriously, so many people (including myself) have put off doing things for their financial health, that it’s astounding. The mere fact that we don’t require (nor even offer to teach, in some cases) basic financial health and related issues in high school really blows my mind.

In case anyone’s interested, I’ve continued this discussion on darroj's blog, here: http://caps.fool.com/Blogs/ViewPost.aspx?bpid=19344&t=01006374939148858650#comments 

It's a bit long-winded but hopefully a good read. Bring a pillow and some coffee before popping over!

Fool on,

--Gar 

 

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#6) On October 16, 2007 at 11:27 AM, darroj (27.98) wrote:

Thanks for your great response! I responded in my comments section since I couldn't find your email.

-darroj 

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#7) On October 16, 2007 at 10:11 PM, chief63 (41.89) wrote:

Gar, I sent you a responce about Institutional Ownership.   You will find it in my Blog.  Thanks, Chief63.

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#8) On October 17, 2007 at 2:52 PM, JonBarleycorn (69.77) wrote:

I like your analytic approach -- very sound.

The Fed's foolish firehose of liquidity will float everybody's boat for a while. I often wish that when stupid investments are made, the market would be left alone to apply the spanking.

The inflation caused by this foolishness will cause the dollar to sink as gold prices rise. Foreign countries will probably not begin to unload US paper, but that nightmare is possible.

With respect to darroi's comments: emerging markets probably represent a bubble, but, what a wild ride until it pops. I've been known to try calling market turns, but this can be difficult for emerging markets.

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#9) On October 18, 2007 at 1:01 AM, TheGarcipian (34.00) wrote:

I hear that, Patrick (JonBarleycorn)! But we can profit from that artificial float whilst looking out for the upcoming spanking. And I'm like you: I love the tease, the taunt, the chase of the money, and trying to avoid the spanking, but most of the time, I get slapped around at least once or twice. Hopefully, in the end, the slappings are less intense than the gains, but I'm still learning!  Yes indeed, the emerging markets are today's Internet bubble: full of hype & promise & excitement. Some will deliver but many others will be severely punished. So use your stop-loss limits carefully, and good luck to you!  And congratulations on retiring at age 58. That must be sweet. For now, I can only dream of doing that, but I am working towards it.

Do you have hints & suggestions on how to reach that retirement for the rest of us?  I'll have to check out your blog when I get a moment to see if you have any words of wisdom. Thanks in advance for them.

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#10) On October 20, 2007 at 1:06 AM, mikwilly (31.64) wrote:

Richard (‘Garcipian)

I’m responding to actually three posts of yours. (Your blog, my blog and JonBarleycorn’s blog.)

First, I left a comment on your blog on Aug 12.  I had been commenting on how I had a similar experience as you climbing the charts almost overnight, made it to #71. (I fell today though – now trying a new tactic).  Then I compared our charts and it looked like we were in step for sometime.  My accuracy is not as high as yours though (gives me something to strive for), I’m still suffering through my rookie months when I pick stock I “thought” were good.  I still have most of them in my CAPs portfolio holding me back (don’t want to drop a loser and take a permanent accuracy hit). That’s another discussion though.  I thought our picks would be similar until I notice you were not a “dreaded” skeptic as I had become (never knew it was dreaded, but it was just one method for me to begin my climb.)  Well you may be wondering where this comment entry went.  So would I.  Your response to TO THE FOOLISH POWERS: PLEASE FIX  though may explain what may have happened.  I am now writing this in Word per your advice.

Second, Thanks for your advice mention above.  I don’t know how I happened to find it since I wasn’t even looking for an explanation for my missing comment.  I just though I must have put in a naughty word or accidently wrote something inappropriate and was censored.  That would have been a first.

Third, thanks for the congrats.  My prize arrived today.  I know why you don’t have time to contemplate owning a Wii – you’re to busy blogging.  Many, including me, appreciate your sacrifice for our education.  You are the first to figure out my moniker– even those who know me (except my family).  Since I ran across you in CAPS, I’ve been trying to figure out yours-even Googled it.  No Luck.  It reminds me of a Shakespearian character. 

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#11) On October 22, 2007 at 3:08 PM, TheGarcipian (34.00) wrote:

Hi MiK,

Good luck on that search!  The moniker does indeed sound Shakespearian, and in some sense, it is because it's part of a "play". I came up with the word about 26 years ago when my brother and a friend asked me to host a Dungeons & Dragons game for them. I dutifully responded and created the world of Garcipia for them, and it's grown from there, adding 3 or 4 other guys to the mix over the next 2 years. Though we rarely play in that world anymore, the bonds formed then have lasted to this day, and I consider them all my very best friends, spread out literally across the globe as we are. (Thank goodness for the Internet!). As I've told them several times before, Garcipia was always there; we just had to find it ourselves. And although I've been investing since roughly 1990, the stock market still seems like a bit of a "fantasyland" for me, so the moniker seemed appropriate. You can always dream about fat purses and living like a noble, but unless you take action, you're not likely to slay the dragon!

Regarding your moniker again, I thought (at first) you were some rogue McDonaldland creature. Like Mayor McCheese, I thought you might be a closet MCD holder, going with a twist on the name of "McWilly". That is, until I saw your profile. So, does your "fantasyland" come with fries and a Coke?  ;-)

--Gar 

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#12) On October 24, 2007 at 5:21 AM, JonBarleycorn (69.77) wrote:

Straddles

BTW, I wanted to get back to you on the issue of straddles. First of all, a straddle is a kind of option trade. You buy the right to sell one leg of a stock at a higher price (if it goes up). At the same time, you buy the right to sell another leg of the same stock at a lower price (if it goes down). You make money when the gap widens beyond the option’s cost.

Straddles are useful if a stock is poised for a big move but, could move in either direction. In the context of my rant, the stock was a biotech company (DNDN) with FDA approval on a new drug in prospect.

Unfortunately for me options in CAPS weren’t available and my active leg of the stock in question went south big time.

Privately: as per your suggestion I blogged about "How to retire early ..."

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