TheDumbMoney (59.58)

JNJ, PG, ABT, WMT Have Now Outperformed S&P, Prior 18 Months

October 03, 2011 – Comments (5) | RELATED TICKERS: JNJ , PG , WMT

I'm just noting the above because it is amusing.  After the all the sturm-and-drang, after the all the Hufflepuffle, all the recommendations and blogs, that's where we're at today. 

I have no idea where the market will go from here.  I suspect it is going to go below 1,000 (the S&P), but I'm not sure.  Economic fundamentals in the U.S. do not yet appear as bad as sentiment is, based on all of the metrics I read, but one cannot discount the impact of Europe, or the ability of human beings to talk themselves into a recession.  I therefore have no idea if the above outperformance is going to last, as it undoubtedly will as we go down, but these names will underperform if we bounce (which means if Europe does not implode, and it turns out we are not heading into a recession in the U.S.).  It does not matter to me because these companies are going to be around for a long, long time and I intend to hold all (with the possible exception of Walmart) forever.

I am trying to pull back from day-to-day thinking about the markets.  I triaged my worst decisions over the last year of investing, and ALL have come from emotional thinking, yes, but the questionis where the emotional thinking comes from.  The conventional answer is that it's innate.  Yes and no.  I think the emotional thinking derives from being engaged with the market on a day-to-day basis.  It's funny, although many on this site have talked about such things, it was a pure chartist (Peter Brandt) who finally got through to me, in his excellent book on commodities trading, which I am about half-way through.  Do your research, pick your spots.  Don't buy because of one day drops, rises, or news.

Update:  WMT is a few cents shy of outperformance upon my finishing the post.

I stated a few months ago that I am trying to incorporate more technical indicators into my fundamental buy-and-hold trading.  I think that is the big thing many fundamentalists miss; we are so skeeved off by the idea of trading using charts that we refuse to look at them at all.  I see no reason for that.  How many major chartists have performed as poorly as Bill Miller has over the last decade?  Outperformance and underperformance can come from anywhere, and what a technical perspective adds to fundamental buy-and-hold investing is a layer of risk-management, and also a way to get emotions under control.  It's a way to say, yes, that company you love has dropped, but you know what, chances are 65% it drops further, and if it doesn't get to your preferred valuation, there are other fish in the sea anyway.  I think the biggest lie is that short-term (a few weeks to a few months) charts represent the most updated information the market has.  That is not true.  What they represent is a mindmap of investor psychology, not a predictive one (they are no panacea), but an indicative one. 

Right now the technicals say we are going to 1,000 on the S&P.  We shall see.  We shall see.  I'll be making my October buy no matter what, but I will not be backing up the truck for stocks based on one-day drops.