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goldminingXpert (29.76)

GMX Retrospective: An Interlude

Recs

22

December 11, 2008 – Comments (14) | RELATED TICKERS: C , FAS , ABKFQ.DL

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.

14 Comments – Post Your Own

#1) On December 11, 2008 at 1:25 PM, anchak (99.86) wrote:

Well said!

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#2) On December 11, 2008 at 1:27 PM, HansHauge (32.49) wrote:

I agree on that flexability issue GMX. Someone said that Warren Buffet was like that, able to change his strategy over time.

Don't be to hard on Sinchy, we may see him recover shortly.

Thanks again for the tip about those leveraged bear ETF's.

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#3) On December 11, 2008 at 2:05 PM, Tastylunch (29.54) wrote:

The single biggest mistake on CAPS (and probably in all of investing) is marrying one's thesis

Absolutely true, I may not be as accomplished as those you name but there is a reason why this former commodity bull is a 99 for a second time. 

A single thesis and/or sector bets is really just a type of leverage when it comes down to it. All it does is magnifies moves and that can of course either catapult you to the top or ruin you very quickly.

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#4) On December 11, 2008 at 3:13 PM, goldminingXpert (29.76) wrote:

Though I must admit, Tasty, on a short-term basis, I get overconcentrated. Right now, I'm as all-in as one can get (200 pick limit) on the ultrashorts, and I'm +400 points today to show for it. If we go screaming to Dow 10k, I'm out of the top 10 though. But the people that hold a view like peak oil I think are a different camp than what I'm doing, but if the market rallies hard, I will go down out of the top 10 for a bit anyway.

Congrats on your rise to 99.9dom, I was surprised at how fast you made it back.

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#5) On December 11, 2008 at 3:25 PM, abitare (58.10) wrote:

Good Post and I am align with thinking. 12k in points despite Bubble implosions.

VR,

Foolish Survivor of BRIC Story, Commodity Bubble, Oil Bubble, Real Estate Bubble, Financial Bubble and Stock Bubble

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#6) On December 11, 2008 at 3:31 PM, goldminingXpert (29.76) wrote:

yeah, there has been quite the gauntlet of bubbles and groupthink ideologies to avoid over the past two years.

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#7) On December 11, 2008 at 5:46 PM, MLGtrader (99.24) wrote:

Hey GMX,

 I take it your are a college student (finals).  That is really cool because I am also.  I am 'new' to the market, entering the beginning of this year.  I think having a fresh mind coming into this market has helped me.  I have never seen a bull market, for all I care, they could be a fictional animal.  But I am a smart person and have learned to adapt to the current market conditions.  I haven't read much literature or haven't had a mentor, just picked up stocks on my own as a hobby (becoming an obsession).  I think it helps because I don't have any predispositions or beliefs about the market, I learned everything I know from watching the market in action.  And yes this market is treating me quite nicely, recently my timing in my real portfolio has been great.  This year is the best year for my stock investments ever, up 50% (and my only year).  I am using the proceeds to pay for college.  I am up about 10K and counting.  I do spend a ton of time when the market is open watching it closely.  Right now I have SRS and FAZ along with some small caps.  MTH took me for a big ride giving me most of my gains in the last week. 

Regarding your comments about not getting attached to something, you must be talking about with real money because the strategy in CAPS is to only end picks in the positive (as you can see from all top players).  I got burned badly in caps from picking commodities, but I am still holding every single one (over 100) til they move positive.

Where do you go to college and what year are you?  I am a sophmore at UC Berkeley.

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#8) On December 11, 2008 at 5:54 PM, goldminingXpert (29.76) wrote:

I've let a lot of CAPS picks run tat aren't likely to work out, but I'll take down a green thumb or two every time the market makes a new low so as to clear the deck of my "these companies are never coming back" plays. When the S&P heads down, your CAPS loss is smaller. Both in CAPS and real money though, people refuse to take losses... not so much just in one stock, but in a whole sector. If you had 20 picks long oil producers and all 20 are in the red, it might not be the best idea to add another 20 oil and gas plays... when you see a whole lot of picks in the red in related businesses you have to reevaluate what you are doing. I had a lot of gold picks go red on the most recent moonshot in gold, so now I'm trying to figure out how I will hedge this to prevent an irrational bull run in gold from sharply reducing my score.

Congrats on your winnings this year, I'm a lot like you, I've learned from trading the market constantly; nor from books or gurus or "common wisdom" though books are good. I'm a junior econ major at Colorado State U.

Plus 814 points today, eh? I may be a bit too concentrated in the ultrashort sector. Oh well.

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#9) On December 11, 2008 at 5:55 PM, HansHauge (32.49) wrote:

Say "Hi" to Aubrey DeGray for me...

Gratz on paying for school with stock market earnings. The stock market is the new Texas Hold Em'

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#10) On December 11, 2008 at 9:46 PM, semper77 (33.58) wrote:

Well said GMX....gotta hand it to you, bro. Not only are you correct in your assessment for the need for flexibility in this game, but you were spot-on with this recent bear call. I thought this recent run up had the juice to get us to 9500 or so, but now I'm reading this.

...And I'm thinking that, if this business about Madoff is true, the resulting crisis of confidence could really spell trouble for hedge funds, equities, NYC real estate (the next domino to fall in my opinion) and the economy.

It just doesn't seem like the bad news is ever going to end....

 

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#11) On December 11, 2008 at 9:58 PM, Tastylunch (29.54) wrote:

Though I must admit, Tasty, on a short-term basis, I get overconcentrated.

 Yeah I am as well. Too many redthumbs on REITS for myself.   +737 today, that shows too much weight in one direction Unfortunately my timing stunk with my second batch of reds so can't harvest a whole bunch yet.:-(

Right now, I'm as all-in as one can get (200 pick limit) on the ultrashorts,

 I try to keep myactive picks under 170 to always give myself some flex room.I probably also don't have as much time to research stocks as you do so I need a cushion against bad timing since I don't have the luxury of being able to trade everyday.

But the people that hold a view like peak oil I think are a different camp than what I'm doing,

I'm at heart a macro trader/investor myself and a believer in future oil shortages (at least off the numbers I saw as a Geo undergrad) but I think to ignore delveraging and recessions is not smart. Both are commodity killers always have been. Nothing says Peak Oil is going to be a straight line anyway....

Still the dollar looked weak today, we'll see. if perhpas the trend will start to be inflationary again. Although it's hard to think it will be anytime since the banks are chopping everybody's credit.

Congrats on your rise to 99.9dom, I was surprised at how fast you made it back.

Thanks we'll see how long I stay this time. I think my rise is more due to people falling behind me than what I really did. The Top 100 sure looks  alot different than it did back inMarch. that says a lot about the people who are still there (everyday, TDRH, eldrehad, dwot etc.)

At the rate you are going, you should hit number 1 before too long if you can get that accuracy up to 88% or so.

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#12) On December 11, 2008 at 10:30 PM, gman444 (29.11) wrote:

Think you have it spot-on GMX---too much monogomy with ANY thesis, method, etc. (I am excluding women here, although I realize there is a case to be made), is the way to ultimate ruin...the key is in knowing when to use which thesis.....

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#13) On December 11, 2008 at 10:31 PM, Option1307 (29.90) wrote:

Another sweet post GMX.  I think this is a vital aspect of investing that many people overlook, or simply don't give enough thought about. Trends change, markets change, peoples' emotions change, etc. All these factors can drastically alter the course of the market and thus, as you stated, your strategy needs to be flexible.

It's fine to ignore daily/weekly/monthly variation if you are a long term investor and not a trader; however, you need to be aware of the overall picture and where things are going. The oil buble is a great example. I am a believer in peak/expensive oil, yet I realize that the world economy has changed and thus that scenario is not going to play out for some time, and I adapted accordingly. Well in RL at least, I've taken some hits here in Caps but whatev. People need to be flexible and adaptive.

Good post. Good luck on the finals GMX, I miss those days...

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#14) On December 16, 2008 at 2:11 PM, FleaBagger (29.37) wrote:

In CAPSworld, dwot is letting all of her losers run. All but about one of her closed picks is a winner, and as of yesterday (too lazy to check right now), all of her open picks were losers. Hasn't seemed to hurt her CAPS score too badly.

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