Archive through April 17, 2008

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eblode

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Post Number: 738
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Thursday, April 17, 2008 - 02:10 pm:

Resillent1,

Blow me down! I never knew you had a degree in Psychology. Actually the "Captain" comes from Brazil, that's where the nuts come from.
Eugenio

ody

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Post Number: 2358
Registered: 10-2006

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Thursday, April 17, 2008 - 02:26 pm:

STOCKY: BUYING IN A BEAR MARKET

If we were in a bull market, and the resources and energy sectors had stood out as much as they have done even in our bear market, I would have entered quite confidently and at a good point several weeks ago. The fact that we are NOT in a bull market makes it very difficult for me to persuade myself that these sectors will continue to run AGAINST the predominant trend of the market, and not only do better, but bring me a positive gain which will be better than 8% per year.

I buy stocks with the intention of keeping them at least for a few months, and preferably longer. That way I get my best results, as I tend to back winners pretty successfully, and thus can make good money if I have some time to do it in, with individual stocks. Typically, that means buying in a bull market rather than a bear market, and taking advantage of what is likely to be a somewhat gradual rise. So the whole idea of buying in a market like the current one is actually "foreign" to my usual approach, which I know I can handle.

This means that I am "handicapped" in a bear market, and not least with a volatile stock, in that I have to try and do something which is inherently not easy for me. The following is an illustration. I shall use "highs" for each day, so as to compare like with like.
----------------------------------------------------
Sold BHP on 14 December, at $42.75.

IMMEDIATE FOCUS: locking in a profit, and avoiding a fall in the price of the stock. In this I certainly succeeded, as the stock fell to $31.50 on 22 January.

MEDIUM-TERM PLAN ON 14 DECEMBER: buy back in at a later and safer stage (safer GENERALLY), for, say, around $35. This, I felt (and am still inclined to feel) should be possible. That is, my hope was to buy in a market less risky than the current one - perhaps some months from now - at that kind of price. Note that it is not PRIMARILY price I am concerned with, but the GENERAL STATE OF THE MARKET, as in a bull market the risk of loss increases hugely: in principle for ALL stocks (statistically certainly true). Also, I would be prepared to pay more for a stock if its fundamentals improve. In other words, I NOW think that if BHP was "worth" about $35 on 14 December, its price - given iron and coal prices - could now be, say, $38, and still enable one to make money over some time.

EVENT: the stock rallied back up much sooner than I had thought, and I decided to buy back in on 20 February, but with some fear, as (a) we were still in a bear market, and (b) the price seemed higher than it should be.

NEXT EVENT: sold the next day, at a loss, for $38.80 (actual price). Perhaps a neurotic reaction, but I feared the price would go down pretty significantly.

NEXT EVENT: it actually did do so, though not as much as I thought it would. HOWEVER, the price was very much right for BUYING during the period (roughly) 18 March - 1 April, when it was possible to buy the stock at somewhat over $35 on several occasions.

THIS, I NOW FEEL, WAS THE TIME WHEN I WAS ASLEEP AT THE WHEEL. I was singing the stock's praises most of the time, aware of the likely good prices for iron and coal, yet did not buy because of my general distaste for the market. I think I could in fact pretty safely have bought at that point. To insist on a lower price than $35 was not my tendency anyway, so a price like that would have been quite OK, especially as all in all resources looked good.

I now think the stock is likely to be reasonably safe, after recent good news, at $38, but would still prefer something like $35, and if we do get another down leg I think it might just conceivably go back there. If not I might look at buying it for $38. But I am a bit hesitant about that as I believe that those who think several resources prices will "correct" may well be right.

The major lesson is probably that I should not try to do this kind of buying, during a bear market and with a volatile stock, anyway. The next one is that I should have stuck firmly to my idea of buying at $35, as - IF I was to buy - that seemed reasonably safe to me, for it did not show much inclination to fall below that after the initial big fall on 22 January.
--------------------------------------------------------
I give you the whole account to indicate just from what GENERAL perspective I buy and sell stocks, so that you will see that I don't usually make isolated decisions about a company, BUT ACT WITHIN A GENERAL MARKET FRAME WORK. As that is not in this case congenial to me, that enormously increases my chances of "getting it wrong". In the event, I could even have stuck to my 20 February buy, but that was a bit of a "panic" buy ("I am missing out here").

The better time would have been late March, when the price was lower. Also, by then there had been more time for consolidation, and the chances of the stock falling below $35 came to look slight. I was then not properly concentrating, as I feel that - particularly from a somewhat longer perspective - $35 or so would have been right. Even if it fell BELOW that price one would not expect that to be for long. I am assuming that the market is not going to go all the way back to 22 January, which I think is unlikely, and particularly for this stock.

Now I don't think one can expect a more honest and self-explanatory account (or analysis) than this. The purchase of BHP would, for me, until recently have gone quite against the grain given my general sense of the bear market. But I do concede there are always exceptions, and that I was unduly wary about this stock as a result of my general sense of the market as a whole.

As against that, in the VAST MAJORITY of other cases where I have felt disinclined to buy the decision was right in that stocks did not go up, but in fact often down - and that was not only so in the case of banks or other financials.

Furthermore, as I have said before, I am not prepared to take truly HUGE holdings in single stocks. It is true that the $200,000 which I spent on 20 February on BHP, RIO, and WPL, would by the end of yesterday have netted me more than $12,000. So I had certainly in principle chosen the right type of stocks for my modest investment, even though on 20 February I didn't (in principle) choose the best day. So this is, indeed, a gain I have lost out on, and of course I am not happy with it.

I keep a sense of perspective about it, though. If that $200,000 had been a substantial portion of my capital, I would have felt rather sore. But the difference would really have made me feel "bad" only if I had invested in about $1 million, and I would not spend that kind of money just on these three stocks, while I cannot find enough stocks at this stage that I gladly WOULD spend such money on with the market facing so much bad news and so many bad headwinds.

If I get 8% tax-free on a million that is $80,000 for a year. I need some convincing that I shall easily beat that, with reasonable safety, over a year, for me to put a million in the share market. I'd need stocks that ON AVERAGE, and with reasonable safety, would give me that return. I am not able to go in and out all the time, like a short-term trader: not experienced enough in that kind of trade, and for me MUCH TOO TIME-CONSUMING. I aim for a modest but profitable long-term result, which will make me perform better than the index over the years, and in that I have so far succeeded. It's not an over-ambitious goal, and one I know how to achieve. If I risk too much, I can't do it.

I confess that, with time moving on, and the market looking a bit better, I am beginning to feel drawn to perhaps investing at least PART of my capital in the market, but only very selectively, as I do fear bad fundamentals.

rdumas

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Post Number: 1327
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Thursday, April 17, 2008 - 02:33 pm:

Eugenio,

You are an absolute screech. I was having a drink of your Southern Comfort (thanks a million) when I read your post and had to clean up afterwards.

Mr Lunch,

Thanks for you response. I can clearly understand the possibility of things becoming confusing when trying to balance two completely different time frames having converted from a short term trader to a medium term investor. The strategies used between the two are completely different. I would imagine that the long term portfolio was developed some time ago and hence you spend more 'thinking time' in your short term trading world.

I have already split my capital across two banks but wanted the extra diversification. I agree that if all the big four banks imploded then we would be in real strife.

Cheers

resillent1

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Post Number: 429
Registered: 10-2006

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Thursday, April 17, 2008 - 02:39 pm:

Eugenio

You never fail to make me laugh - Thanks

SRX is in a trading halt pending a legal decision about who owns their intellectual property. Could be about to get spanked. Wish me luck.

rdumas

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Post Number: 1328
Registered: 11-2006

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Thursday, April 17, 2008 - 02:44 pm:

Hi Sway,

A good point. In a previous post I mentioned that I give some TA tools more credence than others. Top of the list are resistance and support levels (both horizontal and those formed by trend lines and channels). The descending trend line in my previous post on this subject is quite a strong one as it has already touched at three points.

I use the TMF and RSI as secondary tools as I find that they do not have the same level of accuracy of future probability determination in my experience. Hence I tend to use them more for confirmation than primary indicators in my analysis. Note that even in your chart of the TMF that the rate of incline has diminished in the last few days.

I stick to my prediction of a failure of the current rally within the next day or two. I would put a 60~70% probability on that prediction.

sway

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Thursday, April 17, 2008 - 02:58 pm:

Fair enough Rudy. I understand what you're saying. We'll have to see what happens. I am not sold on the TMF, but you would think if it's trending up reasonably strongly, the XJO would have a good chance of going through the upper boundary of your descending wedge. ie a close above 5600 in the next few days.

Sway

sway

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Post Number: 213
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Thursday, April 17, 2008 - 03:07 pm:

Star Stocks

Could someone with Stock Doctor please post the current list of Star Stocks for further study and discussion.

Thanks
Sway

hilarius

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Post Number: 3633
Registered: 04-2004

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Thursday, April 17, 2008 - 03:39 pm:

Good Afternoon

There are two economies

(1) Trade in financial rubbish, made worse by leveraging ... a house of cards which may have much further to collapse

(2) Trade in things that people need or want

One is a bogus economy and the other a real one

Allowing one to affect the other is a logical absurdity

It is time the markets and responsible people came to their senses

Hilarius

I come in peace to share my thoughts and to shine my candle light on possible long term opportunities

ody

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Thursday, April 17, 2008 - 03:49 pm:

HILARIUS

YOUR DIVISION IS ABSOLUTELY RIGHT. THE DIFFICULTY IS TO DECIDE IN EACH INSTANCE TO WHICH EXTENT THE BAD HAS INFECTED THE GOOD, SO, ALAS, IN PRACTICE THE TWO HAVE INDEED BECOME MIXED UP, WHICH SHOULD NEVER HAVE HAPPENED. EVEN SO, SOME ARE MORE CLEARLY AT ONE END THAN THE OTHER.

ody

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Thursday, April 17, 2008 - 04:03 pm:

SWAY ; SD STAR STOCKS

It's quite a list, as of course there are quite a few companies that (at least in theory) meet their criteria, and that includes some that might at a different time have been excluded as too expensive. The following is just the list, at this stage, without any comment (occasionally no doubt the letters will be wrong - I am acting in haste):

AHD, AMM, ATM, ASZ, AAX, ASB, AUW, BMX, BTA, CPU, CTY, CSL, DTL, DJS, DJW, EQT, ESV, FAN, FWD, FLT, HGT, IIN, IMD, JBH, JET, JBM, JST, LEI, MAH, MQG, MMS, MCP, MLB, MGX, NCM, PME, QAN, QBE, RKN, SEK, SRV, SMX, SST, STS, SUL, TRS, TRG, TBG, UXC, WEB, WOW.

These are, as SD sees it, a list of stocks which MEET CERTAIN IMPORTANT CRITERIA (LARGELY FUNDAMENTAL). They are NOT to be seen as "recommendations", but as providing a "universe" from which one might sensibly select some if one agrees with the criteria; if the stocks fit one's own profile as an investor; if further research shows that there are more good things to be found; if they are liked - by the market - on a T/A basis, etc.

So there are sundry ifs and buts. Nevertheless, there are certain to be some very good companies among them, including no doubt some that one could sensibly enough buy now or in the near future, especially if one bears in mind the general tendencies of the market.

MOST of my transcribing should be accurate, but there are no guarantees!

sway

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Post Number: 214
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Thursday, April 17, 2008 - 04:13 pm:

Thanks Ody. I will cast a Weinstein eye over them and report back.

Sway

sway

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Post Number: 215
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Thursday, April 17, 2008 - 05:55 pm:

Ody, can you check HGT please.
Sway

captain_chaza

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Registered: 02-2003

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Thursday, April 17, 2008 - 06:00 pm:

WHO IS NOW THE FOOL?

Nothing more needs to be said!

Salute and Gods' speed

"While we stop and think, we often miss our opportunity." Publilius Syrus, 1st century B.C.

"I believe the future is only the past again, entered through another gate."
Sir Arthur Wing Pinero 1893

"There are two times in a man's life when he should not speculate: When he can't afford it, and when he can." Mark Twain, 1897

sway

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