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Predictions VS Facts; Teeter, but don't Totter.

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May 18, 2010 – Comments (17)

I'm a bull by trade, but most smart bulls know when they've been penned in and the jolt form the electric fence has more sting to  than that grass or another look at that Jersey Gal across the fence is worth. Their day will come.

The bears had a lot of fun on May 7th with a little help from some computer routines or some human idiots. They will get some fun in from time to time. What some people still don't realize is that the programmed stops are set to occur at different hours of the day and at 2:30 the locks are off. I'm not too concerned about another computer errant adding to the mix, but humans can cause even more errors. After all they wrote the programs.

I generally see little good by giving unsubstantiated predictions.  We have Crammer and thousands of other pundit for that.  (Putting it in "nice" terms).

Still, keep in mind a few good trading guidelines:

1. You can't catch a falling knife. ((Well you can, but expect it to hurt).

2. The trend is your friend.

3. Be greedy when others are fearful.

4. Be fearful when others are greedy.

5. 60% of the traders in the market the last year or two are retail investors with little investment experience. 

6.  Many investors are idiots.

7. The market is an idiot.

8.  People kill, guns don't.

9.  Don't be an idiot!.

Here are some other trading remnants in no particular order.

1.  Germany banned naked shorts.  I'm not clear why the market cares.

2.  The Senate/House is getting ready to crack down on banks, including interest rate caps on credit cards.  Some pundits think banks might lose 30% of potential income.  So what if their trading houses were 30 days out of 30 on their investments.

3.  The Euro is dropping like a rock.  Loaning Money to Greece was expected to stabilize things, but where is the money is the money coming from and where is it going?

4.  If stocks become a bad investment then we usually have a flight to Treasury Bills. The US is printing money as fast as the presses can run. The ink barely dries.  What happens if US governement debt gets downgraded?

So the market thinks it has lots of excuses to sell, but where does it put the money.

Other trading remnants; Investment houses, hedge funds, investors are sitting on Trillions.  Fresh money goes into 401K's for investments monthly.  Yes, unemployment is high, but money is still sitting in big piles. Investment managers get graded on their returns.   

So??  We have a market with a reason to sell. We have investment managers with cash to invest. WE have less than educated retail investors jumping in and out.

What else do we have?  We have US Firms with record earnings. Technology producing new products, banks trying to game the system for more record earnings. The governments of multiple countries butting into the flow. 

Teeter Totter = See Saw ;   As one side goes up the other goes down.  Sometimes you get balance.

A plan?

Have a plan?  Regarding a plan.  Did you know that doing nothing is always an option. Many people don't put "doing nothing" on their decision tree, but they end up doing anyway.  Doing nothing can be part of a plan or it can "just happen" due to a lack of making any other decision. Sometimes, "doing nothing" can be a good option, sometimes it turns out being a less desireable option.

Is there something you had been looking at buying but it got a bit pricy for you.  How would you feel if you caught it at a substantial discount even in a falling market.  Have you ever put bait on a hook when you had no idea if the kind of fish you favored even live in the stream or brook?

Do you own an equity that really, really have analyzed and you feel it's a great deal at it's current price or would be even at a slightly lower price?  If so, put it behind a combination lock that will take you a few minutes to open.

 So?  The point.  I don't have one, remember, I don't make unsubstantiated predictions.  Be careful tomorrow, (Wednesday 19 May). It will be a memorable day for some people   Don't Teeter if you Totter.  Play nice, but within the full range of the rules.

The Sky Isn't Falling Today.   I doubt it will fall tomorrow, but some people might think it is. Funny thing about Chicken Little.  If you believe something is about to happen and you convince others it is about to happen then you have a form of someones reality.

Hmm...check out that Jersey cow on the other side of that fence.  Sometimes a little electric shock is worth it!   Gotta Go!

 

17 Comments – Post Your Own

#1) On May 18, 2010 at 9:54 PM, Starfirenv (< 20) wrote:

Did you hear the one about the "young bull" and the "old bull"?

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#2) On May 18, 2010 at 9:57 PM, TSIF (99.96) wrote:

I heard the one about the old rooster and the young rooster, it didn't end up well for the young rooster.  Never mess with old smart rooster and his chicks, sometimes he's smarter than the ol' farmer with the shotgun!  :)

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#3) On May 18, 2010 at 11:40 PM, Momentum21 (40.44) wrote:

Give me the juice baby...put me in the electric pen with the roosters and a see saw...zoinks!

 

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#4) On May 18, 2010 at 11:53 PM, Momentum21 (40.44) wrote:

In all seriousness, while I wish I was more robustly hedged short right now...or a bit smaller in my beta...this currency realignment is going to hurt indecisive bulls and bears. The bounces are going to rip some lips off...

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#5) On May 19, 2010 at 12:00 AM, Starfirenv (< 20) wrote:

 TSIF- This one ends well for both. The old bull and the young bull were up on the hill "looking over the fence at the jersey girls" in the meadow, and the young bull says "let's run down there and zoink (thankx Mo21) us one of those heffers".  The Old Bull farts and says, "let's walk and zoink 'em all". Confucious. Regards.

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#6) On May 19, 2010 at 2:48 AM, JakilaTheHun (99.93) wrote:

1. You can't catch a falling knife. ((Well you can, but expect it to hurt).

2. The trend is your friend.

I routinely go against these two.  I wouldn't have gotten the great deals I had if I did not.  Sometimes, you are "too early" doing this, but the whole 'betting on trends' thing is vastly overrated. 

 

4.  If stocks become a bad investment then we usually have a flight to Treasury Bills. The US is printing money as fast as the presses can run. The ink barely dries.  What happens if US governement debt gets downgraded?

Even if true, this wouldn't affect an investment t-bills in all that meaningful of a sense.  T-bills are very short-term and right now, interest rates on them are absurdly low.  You don't buy t-bills for the great returns; you buy them for the liquidity (and the fact that they are slightly better than holding cash).  Of course, the rates on t-bills could up long-term, but that probably is not that huge of a concern if you're buying a t-bill, since you're going to be out after a short-term timeframe. 

 


But I do agree with your basic sentiment in the blog.  I view down markets as opportunities.  I actually start getting kind of down when the market goes up too much, because I have nothing to buy. Maybe that's an insane mentality to have, but it's how I think.

Irrational panic and fear = great bargains

However, I am still very skeptical of Europe and China, in general, right now.  Those who are able to separate the duds in China from the true winners will make out pretty well in all of this, but I'm not sure I know enough about China to take advantage.  

Europe is trickier.  There are limited options to invest in Europe while investing on American exchanges.  There is also an enormous amount of uncertainty over there --- I'd say I'd be much more fearful of the outcomes in Europe than I was in the US in late '08.  We have a system that could handle the problems --- albeit, in a very imperfect fashion.  I'm not so sure if they do, and this could mean radical reforms.  I also think that while the US avoided a "Great Depression, Part 2", Europe might not.

Fundamentally speaking, Europe is in better shape than the entire rest of the world - though, few seem to understand this reality.  They are miles ahead of the Asia and even the US on building sustainable economies.  But the Eurozone is a disaster and in need of significant changes to simply survive --- meanwhile, they have some of the most useless regulations and excessive taxes in the world; which hampers potential.

But there will be huge bargains in Europe (there already are, actually).  

 

 

 

 

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#7) On May 19, 2010 at 1:31 PM, leohaas (30.99) wrote:

"The Sky Isn't Falling Today.   I doubt it will fall tomorrow, but some people might think it is. Funny thing about Chicken Little.  If you believe something is about to happen and you convince others it is about to happen then you have a form of someones reality."

A rec just for this paragraph: after all CAPS is where a lot of Chicken Littles are hanging out!

"1.  Germany banned naked shorts.  I'm not clear why the market cares."

It removes a hedge option and reduces liquidity.

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#8) On May 19, 2010 at 2:09 PM, TSIF (99.96) wrote:

Momentum21   I've got some hedges, but I really hate 'em.  As you know, hedging means that you lose upside in an up market, but lose less in a down market, but it gives you the added burden of trying to play it both ways, and twice the chance to make mistakes if you're not very careful!!!  :)

StarfireNV  I like your version much better. You can learn a lot from a wise critter. Something to be said in conserving your energy and still getting what you want!!!  :)

Leohass   I agree that banning naked shorts reduces options, but how can you short something NOBODY owns.  There are plenty of blogs about naked shorts, whether it helps or hurts the market.  I think it can bite both ways in individual situations, but in the case of Beer loving Germany banning it on their banks, with little warning or explaination, the perception that they are scared of something is having more effect than one EU nation banning naked shorts should really have. 

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#9) On May 19, 2010 at 2:17 PM, TSIF (99.96) wrote:

I'm with ya  JakilaTheHun

There are many things in my research pile even in an up market, but one useful thing about CAPS is that I can see how some of the equities  I've done some research on are behaving and the decision tree is a little shorter if the market presents itself.  Any of my upthumbs that lose 10 points get a relook, although in most of those cases it just proves I was wrong, in rare cases it tips the buy trigger.

I get bored when the market is mostly steady state. I think it will be a long time before investors get back in the habit of checking their portfolio weekly or less. 

T-Bills;  if you follow the worse of the doomsayers and the US government goes bankrupt then we will have bigger problems to contend with, but if the sentiment against the governments of th world go any deeper then T-Bills may not attract the new monty in a down market that they traditionally do, leaving more cash indecisively on the sidelines that will have to go somewhere.

I follow your sentiment on China.  I have a few that I bite on from time to time and invariably they bite back.  I think there is money to be made in a country expecting a 6-7% GDP upside, but it's very tricky finding the ones to ride that have respected auditors, transparency, and that don't do silly things from time to time like buying a major section of office buildings.

I'm bargain hunting today. One more minor plunge and I'll nibble some more.  WE're either near the bottom of a correction or just starting. I can't resist bargain hunting, but I'm being very careful!  (Which usually still means trouble!!).  No pain no gain?!!

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#10) On May 21, 2010 at 7:00 PM, djshagggyd (73.02) wrote:

Awesome post TSIF! Thanks for writing it. I'm gonna have to read this one twice I think.

~djshagggyd 

 

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#11) On May 22, 2010 at 12:38 PM, TSIF (99.96) wrote:

Ought-O djshagggyd!  Reading something more than once can be a sign that it doesn't make sense!!!  I read it about ten times and I don't understand it!!!!  :)   Thanks for the Kudos!!!  

 The advice didn't help me much. That falling knife required a few stitches!  I did take some of my own advice and made some long term purchases at what I hope are good entry prices. I'll be very happy if this was only a correction. If this was a preview of a major directional change then I'll have bigger things to worry about and long, long calls at a good entry price won't be the worse problem I'll have!   This is the most CAPS picks I've opened in a week that I recall. Now I'm way, way, behind on my pitches!!!   Good luck!!!!

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#12) On May 23, 2010 at 4:12 PM, djshagggyd (73.02) wrote:

Hahaha TSIF... no you've got it all wrong! It's a good thing that I read it twice. It's got replay value!!

I'm glad to hear that you made a lot of picks last week. I've been adjusting a few things a picking up some stuff too. I'm not knowledgeable enough to make any big moves though, so I've mostly just been continuing with my dollar cost averaging strategy.

I did spend a little more than I normally do this time in hopes that this might be a correction. But if not, I'll just buy more when it gets even lower!

Speaking of being behind on pitches... I need to get on that one of these days. I've mostly been avoiding it due to lack of confidence... but I'm getting closer to having something useful to offer.

Thanks again for the thoughtful post and response!

~djshagggyd 

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#13) On May 30, 2010 at 10:57 PM, Tastylunch (29.36) wrote:

TSIF

discovered this today

Looks like you have a CAPS Nemesis!

http://caps.fool.com/player/theskyisfalling.aspx

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#14) On May 30, 2010 at 11:45 PM, TSIF (99.96) wrote:

Strange, I never noticed that one!!! :)

The player was doing pretty good but appears to have had Tastylunch ETF Syndrome!!  :)

Looks like they abandoned ship this past September.  Too bad we can sell ticker names.  I think I could have salvaged that one!  :)

Too bad they are inactive.  It would have been a fun one to watch now that you pointed it out to me. 

I'm much too lazy to have a long username!  I never even checked to see if the full TheSkyIsFalling was available when I got my ticker.

Thanks for the pointer. I'll have to check in on the username occasionally to make sure they don't come back in stealth mode and try to take me out!!! :)

TSIF 

 

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#15) On June 15, 2010 at 12:02 PM, creek138 (29.83) wrote:

Great post TSIF! In other news, I also just learned what your name meant today.

 My addendum:

10. CAPS is genarally a good place to validate your DD before you buy. Testing in CAPS before you buy in RL can also save you some $$.

 11. Never go "all in." Buy/sell incrementally and always have cash or liquidity in reserve.

 12.  Never listen to just one single source on a particular pick. 99% are just as likely to be wrong/right as you are. (see rule 2 and 6)

13. Reevaluate and reassess. Don't hold onto stocks stubbornly, if it goes down less than 20%, reevaluate as to why, then choose tosell/hold/buy more accordingly. Alternatively, don't immediately sell stocks that were down and go back up to your purchase price. Often times they're just starting to heat up and you'll miss gains.

14. Be wary of Trading Commissions and Margin Interest! They will evaporate your gains if you don't keep tabs on them.

 

Also, congrats TSIF! You've really been very active lately and the gains are starting to show. Here's to hoping I can catch up to you again.

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#16) On June 15, 2010 at 1:04 PM, TSIF (99.96) wrote:

Hi Creek138, looks like you've had a nice few weeks as well. WE need the market to bail us out on our Ultra's!   Generally I don't play more than a few at a time, but I got caught with about 8 open when the worse of the "correction" started.

They go down fast, but will come back up fast if the market can find something stable to rest on.  It's seeking, but good news  is scarce.

I like your addendum.  I do a lot of number 10, but I do get impulsive at times.  Number 13 is a hard one for me. I don't give up on equities when I should. I'm better than I use to be, except medical stocks. I tend to hold those waiting for an "event" then I don't sell when the event occurs and down we go again.

The user with the similar user name is theskyisfalling. I generally sign off from some of my blogs/comments with

The Sky Isn't Falling (at least so far today).  :)

Wouldn't be much fun investing if one had the "Chicken Little" syndrome full time.

Thanks for the callout. You have a nice assortment of equities in your profile, you might catch up with me soon if my timing gets off. I've had some lucky calls lately on the "junk stuff".  I'll be watching my back, but after multiple trips back down the scale, down to propeller head a few times, I don't take things too seriously!  :)

 

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#17) On June 15, 2010 at 1:10 PM, Momentum21 (40.44) wrote:

We took the stun gun to the back but the pain only made me feel more alive. : ) 

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