While the entire idea of electric boogaloo is hysterical I need to disclose that David Gaffen at MarketBeat came up with this a while ago.Yesterday in the car I caught a Dennis Gartman segment on Fast Money. Mr. Gartman expressed some concern for parts of the commodity complex that he has favored and also posited that now might be time to take on more equity exposure. He specifically talked about having sold commodity ETFs on Monday, he mentioned JP Morgan (JPM) but I am not sure if he bought the name (if you know, feel free to leave a comment).
It seemed like he had made some meaningful changes to his portfolio based on the action on Monday.
Assuming I have that right it raises an important investor know thyself point.
Making serious changes to a portfolio based on the action occurring on a given day (or two) is probably the wrong strategy for most people (me included). Just so no one get the wrong idea I am not taking a shot at Gartman just pointing out that if you previously were not one for big changes based on what could be a change in momentum for market segments before you probably should not be one for those changes now.
If you listen to Gartman, he clearly knows what he is doing with regard to momentum, making changes, spotting trends and so forth. Other people have equal success buying on weakness and selling on strength.
Changing your stripes on a whim based on a segment on TV or from one article you read is likely a very bad idea. It is an especially a bad idea when the market is having a crisis of some sort like now.
If you are familiar with Gartman you know that the changes he made Monday (again assuming I heard correctly) could be reversed at any time based based on his interpretation of the market. Making big portfolio changes on a regular basis will work for some folks but not for others. Where does your approach fall in this discussion?
The desire to react to a compelling argument made by someone who sounds like they know their stuff is very human--we've all done it once or twice in our lifetime--and buying a stock in a moderate quantity in this context that sounds like a winner will not be the end of you by any means but the pattern of reacting excitedly on a regular basis is a potentially dangerous behavior.
9 comments:
Hooray! I'm not the only one who will throw an "Electric Boogaloo" at the end of the second revision. I'm going to assume that you get strange looks like I do when doing that.
I think you should have a plan in place and not react. In other words, rejiggling something based on two days of actions may be prudent if it's part of your plan. I like to wade into positions on dips. I also have a defined threshold for pain. So the deeper or more sustained the dip, the more possibility that I may be shaken out.
My question is, did those two days redefine his overall view of the markets as a whole and for the long term? If so, that's scary.
Where does my approach fall in this discussion? Any major portfolio restructuring I ever made took some considerable time to mature and was not very profitable. Incremental changes have been a better strategy, that is, until last December, when I put everything into triple A government bonds. I can't claim to have done that because I was so smart but only because I got scared & needed to sleep better.
Willy
if history is any guide into how sentiment in bear markets works then this is shaping up to be a normal feel good rally.
a real bottom would a surprise considering the magnitude and time of what wouldn't even be a bear market if the bottom is in.
I'm all for buying equities right now, and a few people seem to be jumping on the JPM bandwagon.
But, question. What specifically makes this guy want to jump in the market? The Bear Stears buyout? The Fed lowering rates again? St. Patricks' Day?
my understanding of what he said; his perception of momentum/sentiment.
Let me be clear again, his track record for being right more often than he is wrong is quite good.
Well I hope Gartman is just early. The switch out of commodities seems to make sense soon I am just not sure the commodities run is done yet.
I also think stocks have not yet found a near term bottom yet but we will see. A real bottom would be rather difficult to predict at this time IMO, but I am sure there are people who know a whole lot more than I do.
seg
This isn't the first big rally we've seen in this bear market. It's an ordinary big rally for a bear market.
And oh, yeah, It's a bear market.
I have to keep repeating that I'm an investor, not a trader, and click my heels three times...
Roger,
Thanks for the Gartman comments. I reviewed my position on the dollar and decided it was close enough to a peak to sell most of my GDX this morning. I decided Gartman was probablly correct on commodities after all.
I still have some GDX but the sale saved me a bunch.
As for this being the time to buy stocks, I am still not convinced. Although I will review that as well.
I just do not see the market having made a bottom yet, but I have been wrong before.
seg
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