Archive for July, 2007
Hey everyone,
We are seeing a nice bounce in the markets this morning. The S&P500 is at 1485 as I write this(!!!). If you look at the 5 day chart, you will see this could take us back to part way through the crash we saw last week. The market is saved!
To me, this feels like a dead cat bounce - one formed by a pump in liquidity and a jump in premarket futures.
We are told time and time again that you can’t predict the market. And time and time again people try to predict the market. Many model the market using stochastic principles, and use it to predict the market. I find this completely amusing (stochastics is about multiple destinys based on a single context.)
TraderFeed a favorite blog of mine had the following to say (Are We Making a Bottom).
There is both the sense that we could go much lower in a washout (a “Black Monday” scenario) and that we could be seeing an important bottom in the making.
Fair enough, good point we might be at an inflection point.
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Monday, Jul. 30, 2007
by Christian
Well, I was right (see Wednesday’s post). That at least feels good. However, I thought the market would make a decent recovery. I had raised my limit price to $51.20 (from $50.20) yesterday, realising the recovery was probably not going to be as strong as I wished.
However, when I logged on tonight (it’s after midnight in Australia), SDS had already moved up to $53, and as I watched it shot towards $54. I got out the calculator, changed the volume and bought in just as it crossed $54. As I hit refresh now, it is in the mid $54s, heading back down.
Do you buy or do you sell? Steve says the following:
Here’s the deal, if you felt Apple was a good buy at $130 and it drops to $120, why would you sell? Unless some really bad long term news came out, this is a buy trigger to me. Not only does it lower the cost basis of your original purchase, but it increases your holdings at a price better than you thought was good before.
That is a very dangerous game to play since if the stock drops again you now lost double the amount. And you cannot predict whether a stock will go up or down since it is a general crapshot. Easy come and easy go is quite common in the market.
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Thursday, Jul. 26, 2007
by Christian
Two great posts to IG in the last few days have me back to make a counter-post to their great arguments. Call me the devil of IG if you want, but that’s my job, right?
Maybe it’s all the green on the screen so far… but already after looking through things a bit more, I a am less bleak than I was earlier. I had commented on Philip John’s last post that after yesterday’s sell-off, I was ready to sell into today’s bounce to move to about 75% cash from 10% cash.
I’ve decided to make no move today. Today is likely to be a nice up-recovery day. I need some time to think things through before selling long-term mutual fund and index positions. And I’m likely to do more damage selling early today than holding too long. Tomorrow would be a different story. We’ll see.
Part of my motivation to sell off so much is that I’m on vacation right now and would like to not have to worry about the market during this volatile time. (Day-traders are on to something with their owning no positions after hours.)
I’m also being very loss averse as after selling my GRMN at $81 (which it has bounced back above after a few shaking trading sessions) I’ve gone ahead an lost about $150 so far on two investments in Amgen (AMGN) and Bed Bath and Beyond (BBBY). I had had those stocks on my list as good value-TA plays that were counter-cyclical to GRMN.
Some New Positions - What am I getting Into To?
AMGN still looks good…
Just a quick note to say I think the market has had its major top.
I am going to wait for a pullback tomorrow (Wednesday 25th July) and have an open order to go short SDS at $51. Hopefully this will get filled in the next day or two.
The consumer is tapped out. After consistent 25 basis point increases to the Federal Funds Rate, we are finally starting to see the effects on the stock market.
Yesterday morning we saw three headlines that caught my attention. The first detailed Sears’ guidance for this quarter – a reduction from $2.12 to from $1.06 to $1.32 per share. These revisions are, at best, a 30% reduction and, at worst, a 50% reduction from their previous optimistic estimates.
Notably, declines were across all categories. If you follow the theory that the consumer is on thin ice, then it is hardly surprising to find big ticket items are not being purchased. Sears is having trouble selling new stainless steel fridges and widescreen TVs because consumers do not feel confident about their financial situation. The only sector that wasn’t hit as hard was women’s apparel and footwear – suggesting stressed housewives may be engaging in retail therapy.
Many of you will have read about the advantages of Exchange Traded Funds over Mutual Funds. However, have you considered beyond the “ETF” moniker to ask: “What ETF index should I be looking for”?
To start with, let’s quickly examine the basics of ETFs. These are generalities, but tend to hold true.
Exchange Traded Funds are managed such that the asset allocation of the fund matches the underlying index the fund is attempting to emulate. The indexes range from well known (e.g. S&P500) to obscure, created specifically for the ETF (e.g. water focused). Management fees are generally less than 0.5%, but can be higher for specialized funds. ETFs trade daily on the stock exchange and can trade at a premium or discount to the underlying assets. Through fancy footwork, ETFs generally retain profits within the fund and make only small distributions each year.
Bill (CEO of WineLog) did a quick little post on Wine Investing over at the WineLog blog and introduced me to a site called WineInvestor.com.
A good site to learn about wine investing is wineinvestor.com. Wine Investor is collecting (in one place) all the types of information I would need to explore investing in wine. The guy that runs Wine Investor is from the financial services field, works with technology, and loves wine. What a killer resume.
Investing in wine could be a great way to diversify your portfolio. Especially if, like me, you already have a passion for wine. WineInvestor calls it an alternative investment, specifically a “collectible”, and suggests about 5% allocation in collectibles in this article on asset allocation and diversification. (Let’s see, that means I need to go shopping for about $1500 in wine. Nice!)
Here are some other great articles from WineInvestor. New posts are added about once a week or so.
Friday, Jul. 6, 2007
by Jason
