GMX Retrospective: An Interlude
Part 2 is on hold while I study for final exams. That being said, I crossed the 8,000 point barrier for the first time this morning, and stand presently at 8,054. I've seen a lot of good players fizzle here, way too many CAPS players would get to 5,000 and then turn around and see their CAPS rating turn back into a mirage. What can you do to avoid stalling out in the top 100 and break through to the magical lands of Dwot and Specbear?
The single biggest mistake on CAPS (and probably in all of investing) is marrying one's thesis. The saddest examples come from players like TMFSinchurina who were 99 rated CAPS players with thousands of CAPS points. The gold/oil bubble players never realized their time was over. Even as their scores dipped towards zero, they didn't reevaluate; there is one simple question one must always ask; has my thesis changed? Clearly as oil went from $147 to $40 and silver from $20 to $9, something happened. Yet their rhetoric remains surprisingly unchanged from the $147 oil days... peak oil!! Doom and destruction, $10 gas, famines everywhere! Wake up guys, that was so last year, we're in a depression now.
Similarly, attachment to other sectors can be just as bad. Take someone like BullMarketN09 who emerged out of nowhere and shot up all the way to #1 on a lot of garbage financials. Kudos to him for having the vision to see that a monster rally in financials was coming. However, he also gets a wag of the finger for not closing his picks... he let a surprisingly high number of 100+ point picks turn back into losers; watching a stock like ABK triple can make you think you actually are a genius if you bought some--you're not, you just got lucky playing the "greater fool (lower case "f")" theory we all know and love.
While I am a bear with strong convictions that we are heading down until the government stops trying to turn us back into the USSR--I am not married to the doom and destruction the permabears. My best couple of picks recently were all on the bullish side, even in the horrid financials. I got nearly a double on Citigroup when it was priced for bankruptcy along with big points playing the 3x financial ETF (FAS). It is interesting to point out my best picks have been green thumb on Citigroup and red thumb on Lehman. You got to swing both ways if you want to win at CAPS or investing. You may accuse me of bearing too married to the bearish side (I have said we are in for a repeat of Great Depression with equal severity this time around), but I can snap out of it for a week or two as I did last month and cast my red thumbs upon all the ultrashorts. While we are in a bear market unlike any our generation has ever seen, there will still be bounces. Don't get sucked into the sucker rallies, there will be ups and downs (mostly downs) and you have to stay alert and not trade an ideology.