Today was a great day for longs, with exception to those who own CLF. It’s river-boat gambling night in the day time, here on Wall. Well, technically, I am not in New York anymore; but you catch my drift.
As of 3:45 pm, I am up slightly on the day, held back by my VXXing and cash positions. Nevertheless, stocks like EXK, LNN, KMB, RS and CPST are helping to alleviate any anxiety that I might have felt this morning. In addition, I started a new position in EL, a somewhat defensive play with a predictable clientele.
The discipline that you should never abandon, in light of the VHC blow-up, as well as the others that will come in the future, is position sizing. I’m afraid many of you are 100-200% long a single name, trying to hit grandslams with no one on base. I fear that when you lose your shirt, as the case with VHC today, you get desperate, like a degenerate OTB guy, and gamble more–hoping to “make it all back.”
If you limit a position to no more than 20% of your book, you will never feel like jumping off a window sill, onto oncoming traffic below. More importantly, when you find yourself in a rut, cold as ice, take a break or trade small. The singles and doubles will get your back into the swing of things, faster than any homerun. Let’s face it, most homeruns are the result of being lucky, at the right place and the right time.
I do not like to see my members get fleeced in stocks. Regrettably, I dragged many of you through the mud with my YELP; but that ended up a successful trade in the end–having sold the entirety of my position north of $25. Perhaps VHC will rise from the ashes and accomplish what many of you are hoping it will. But it’s just a stock, not a business, and there are no guarantees with regards to court rulings, and so forth.
In summary, if you are going to gamble, do so with the houses money.