Think back to 2007. The sub-prime business was violently winding down, housing was descending and the economy was grinding to a slow halt. Yet oil soared and the SPX made its all-time-highs.
Those “in the know” knew what was happening yet the market went along its merry way until its peak. It lied to everyone long enough until everyone believed it. The only ones who made money were the most disciplined and patient sort. It was exceedingly difficult to stay the course if you chose to bet against the Wall Street Machine.
Then, of course, the wheels came off the bus with Lehman’s going out of business sale. The curtain was drawn back and the truth was finally told and it was more ugly than anyone could have imagined. Investors had at least a year to get out of the way.
The ensuing crash brought unprecedented policy and that bought a big, fat rally. Do you remember how frustrated the short were, again. They knew what was going on, yet the market marched onwards and upwards. It went on, uninterrupted, for over a year.
We have been correcting the snapback for the last 5 or so months. Every professional investor knows the deal with the “new normal”. And now everyone, both long and short, have been frustrated to the point of give-up.
We’ve just seen the numbers and they suck. Everyone knows this. Yet the market has not given back more than 50% of its recovery gains. Maybe they will, maybe they won’t. But my work suggests it will be the longer-term investor who picks his/her spots very carefully and on weakness that will make a boatload of money through this market environment. It will sometimes be difficult and frustrating–like it is right now.
Sure, trading is getting tougher and markets are bone thin. Sure, the structure of the market is broken. And sure, long term investors have gone nowhere. That is why everyone is telling you to be a trader and not an investor. Don’t listen to the consensus. Trading can be great, but in this environment you will eventually be slaughtered. This is not a position that is bullish or bearish. There will continue to be rough swings. I don’t have faith in stocks or policy but I do have faith that the system will survive.
My bottom line is that it will be the patient and disciplined investor, like in the old days, who will win this convoluted race.
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In your trading style, Is there a point when you cash in and run for the hills or start to short?
Have you met Alvari/ Lung Sac?
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Yes. But we’re not there now, Hindenburg be damned!
Great post
talking about it and doing it are 2 different things
last I checked you had a hard time taking profits on your winners when they were up
so what have you been hedging with if anything ? averaging down ?
Greatness.
Permabull nonsense, the cliff face is dead ahead, and over we go.
Yes, you’re bearish, on every blog post…we get it.
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Great post.
Patience! hell–
http://www.flickr.com/photos/79468128@N00/2567970187/
I’ve come to the same conclusion
That’s why I shrink my trading account and activity over 3 months ago to 1/5th what it once was and expanded my dividend LT portfolio by as much.
Income stocks have continued to thrive in this environment and go higher during this downturn, go figure.
Pick spots carefully… Thats what i thought i was doing when i picked up education stocks… True, tuition costs may be high, but federal loans continued to fuel high tuition costs Little did i know how much of a communist our nation is becomming with a financial aid that basically requires schools to only teach what makes money. Maybe 10 years from now buying 60% above what theyre at now will still be a good move, but the question is “how does one pick spots carefully when at any given moment, facist and communistic ideals could take over any sort of potential growth…?
If the rules of the game continue to change, doesnt the research and work done become less significant?