Here I am in Honolulu waiting for our connection over to Hilo just starting to write this post. I sit in this spot to plug in every time.
I have been catching up on what happened while I was watching Kung Fu reruns on the plane (no joke), I've got Northern Exposure and Crime Story for the ride home.
I saw the market open on the ISM print and obviously it puked down from there.
Over the weekend I blogged about wondering if I was wrong and whether I should get more long. I expressed a second guess but that I had no intention of doing anything differently which was the case, no widespread trades this week.
So my second guess came at a top of sorts. This is a great example of how to manage emotions/thoughts/whatever. Doubting yourself is part of the equation of participating actively in the market. Succumbing to emotions/thoughts/whatever in a panic doesn't have to be.
One aspect of this site is a look over my shoulder at what I am thinking and this sort of "what if I am wrong" moment is a great example. It is ok to experience these. Obviously at this point I am glad I did not commit more but maybe we rocket off the low today and that's that, I don't think so but there is no way to know.
I guess the point is to realize you will have moments like the one I just had and knowing so ahead of time (I did know ahead of time) can spare you from a reactive trade that ends up being a mistake.
Questioning where you stand is common for many folks in the bear market process.
aloha.
6 comments:
This is when everyone should have their tax loss harvesting replacements list for each investement set up.
Can we talk more about how we can take advantage of the down turn? In this regard, i know financial are beat up but a lot of their losses appear to me to be on paper--large allocations to reserves. Nothing is 100 percent and i expect that the reserves will never all be used up so there will most likely be a bounce to positive when the dust clears. Do we have to wait for the market to cross its 200 day moving average for that moment?
"Can we talk more about how we can take advantage of the down turn?"
1. let the down turn truly bottom - that could take a while
2. If you believe this is a retest of the recent bottom and that retest will not fail to the down side. (big IF) Then buy something that will SNAP back at this weeks lows. But do not expect Roger to help you with this SPECULATIVE move.
Personally I am guessing this retest will not fail this week. Not exactly long term investment advice. I also do not have very high confidence because I do believe it will fail in the intermediate term.
seg
I so totally went though what you described, but I traded on it selling my short etfs two days ago thinking we might be in for a longish rally. (Even though I had beefed them up last week having a strong feeling we would get a downdraft this week.)
But I second guessed myself, thinking I must be wrong with so many others seeing the rally as justified by the interventions the Fed is doing. I must get more confidence in my own judgement. I was more frustrated with myself than with the actual market meltdown and subsequent losses.
Slmasker,
With volatility this high, it's worth giving a second (and third) look at covered writing. It can dampen your portfolio's gyrations and extend waning confidence, if not courage, in one's longer term views.
SPY offers a thick market in both puts and calls. IWM offers the same. SDS options lack liquidity, as does the market for TWM options, but careful selection can help.
I saw the market's "longish rally" as an opportunity to harvest some itm SDS calls I had sold (against the held underlying) when SDS had been around 69. The market's rally turned those calls into paper profits, and with the recent weakness reiterating the depth and breadth of stress in financials, I rolled most of the remaining sold Feb calls into Mar calls, and given the volatility, was able to book a credit at a HIGHER strike.
At some point, I may/will get exercised on a sold call, but I consider that an externally provided discipline (exits are harder for me). With so much incentive (structural and psychological) for the market to (eventually) go up, the positions in short ETFs have to be considered temporary in any case.
The 200 DMA (or some other indicator/signal you prefer) can be used as the horizon upon which you will "let them go" (be exercised), and turn the paper short ETF profits into longs.
I'd be interested in references that may discuss the relative [inefficiencies?] in covered writing (especially when using the method of rolling out into further months). (I'm already aware of the generous profits my web broker is making as I trade, thanks.)
R in NY
So far my simple portfolio of 70% FAIRX and 30% LSBDX has avoided blowups, provided ample long term returns and avoided the need for losing sleep over adding 3% of a double short or 2% of a covered call fund... does anyone really need all of this?
I respect that having lots of moving parts in the portfolio, none of which are overemphasized, can mute volatility (and produce a big income stream for the portfolio manager or provide entertainment value for the individual), I will take giving my money to a legendary (and still young) value investor who holds lots of cash and let him take advantage of the opportunities the market provides...
Do we really think we are adding all that much more value as laypeople (or even most, if not all professional money managers?)... give me the best stock and the best bond managers, allocate to my comfort level and get on with life
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