I just wrote 200 words of drivel about how this market was on the verge of punching short sellers in the face through late January. I deleted the post, then proceeded to defeat my youngest in a game of chess. It?s really stupid for anyone to make long term predictions at this stage in the game. The truth of the matter is, the market is running on faith now. Technicals and fundies have a limited effect on the market. The daily fluctuations of this tape are dictated by the news flow out of Europe. We?ve all known this for sometime now. Pardon my redundancy.
About a month ago, I was sitting high on the hog, spitting at people down below, with annual gains of 16%. Then, all of a sudden, Mother Market chopped my hands off, preventing me from pushing the sell button as the market plunged amidst euro-panic. I shed an amazing 16% aka all of my gains in three short weeks. At the very lows of the market, I was distraught, feeling a sense of defeat and helplessness, as the news turned from bad to worse. I held my positions, only because of my Kamikaze mentality. If my personality was different, I probably would have sold to protect assets from going negative for the year. I rationalized my reasons for being long, declaring that gold/silver miners (then 40% of assets) would benefit greatly under a euro collapse. Luckily, as seems to be a common occurrence throughout my investing career, the worm turned big time last week, allowing me to recoup a staggering 13%.
Upon receiving this great boon, I booked profits in all of my miners, except AG, repositioning the funds elsewhere. Why? To be honest, I don?t know. I just didn?t like the way EXK, NGD and RGLD were trading early Friday morning. I realized selling them would go against everything I?ve been saying for the past month. But, to me, nothing else was more important than making money. My opinions change often and I cannot help that. This will confound most of you, especially new people to the site. If you follow my moves over time, however, you will learn to understand the method behind my madness.
Let?s take the example of TEA. I penned an article on TEA when the stock was $24, declaring it could become ?the next big thing? in retail. In addition to my bullish points, I pointed to the fact that the shares were very expensive and it could drop by 50% without pause. The reason why I didn?t buy it was the same reason why I sold NFLX @ $90. I could not rationalize being long high risk names, with questionable valuations, into a shit storm of negative news flow. In a way, I got lucky. After all, I liked the story and did not feel the excessive valuation was a huge concern, considering high growth names like PNRA, AMZN and CMG have been ?expensive? for years. I just used my gut, and as a result, avoided a murderhole.
The same thing happened with my LULU last week. On earnings day, the stock cratered 8 points. I was very close to just booking the 20% loss and moving on. However, I could not justify booking the loss given the paltry bear case. The earnings were good. People were bugging the fuck out. By closing time, the stock was down just $2, recovering $6 from 9:31am. The next morning, it caught an upgrade, leading to a $2.5 melt up. Another disaster averted.
My point is this: investing successfully is a lot more than reading balance sheets or charting moving averages. It is an art. As an artist, I look at things that many of you might not even notice. On the other hand, my jaded view on stocks often prevents me from enjoying huge winners. It?s a trade off that I am comfortable with because it works for me?having crushed this tape every year since 2003. If your philosophy has never worked for you, do not be afraid to get radical and try something different. Over the course of my career, I was a balance sheet guy, bond guy, VC guy, iPO guy, bank stock guy, biotech guy, tech guy, healthcare guy, military contractor guy and even a chart guy. I?ve endured millions in losses before it all ?clicked.?
Do not lose faith in your ability to make intuitive decisions. Is it luck or skill, who knows? At the end of the day, does it really fucking matter?
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