Here are a few stupid things I hear a lot.
“They don’t have any debt except for a mortgage and student loans.”
OK. And I’m vegan except for bacon-wrapped steak.
“Earnings were positive before one-time charges.”
This is Wall Street’s equivalent of, “Other than that Mrs. Lincoln, how was the play?”
“Earnings missed estimates.”
No. Earnings don’t miss estimates; estimates miss earnings. No one ever says “the weather missed estimates.” They blame the weatherman for getting it wrong. Finance is the only industry where people blame their poor forecasting skills on reality. (more…)
1. Buying a weak stock is like betting on a slow horse. It is retarded.
2. Stocks are only cheap if they are going higher after you buy them
3. Never trust a person more than the market. People lie, the market does not.
4. Controlling losers is a must; let your winners run out of control.
5. Simplicity in trading demonstrates wisdom. Complexity is the sign of inexperience.
6. Have loyalty to your family, your dog, your team. Have no loyalty to your stocks.
7. Emotional traders want to give the disciplined their money.
8. Trends have counter trends to shake the weak hands out of the market
. 9. The market is usually efficient and can not be beat. Exploit inefficiencies.
10. To beat the market, you must have an edge. (more…)
1. Watch the market leaders, the stocks that have led the charge upward in a bull market. That is where the action is and where the money is to be made. As the leaders go, so goes the entire market.
If you cannot make money in the leaders, you are not going to make money in the stock market. Watching the leaders keeps your universe of stocks limited, focused, and more easily controlled.
2. There is nothing new on Wall Street or in stock speculation. What has happened in the past will happen again, and again, and again. This is because human nature does not change, and it is human emotion, solidly build into human nature, that always gets in the way of human intelligence. Of this I am sure.
All through time, people have basically acted the same way in the market as a result of greed, fear, ignorance, and hope. This is why the numerical formations and patterns recur on a constant basis.
I absolutely believe that price movement patterns are being repeated. They are recurring patterns that appear over and over, with slight variations. This is because markets are driven by humans — and human nature never changes.
3. The market will often go contrary to what speculators have predicted. At these times, successful speculators must abandon their predictions and follow the action of the market. Prudent speculators never argue with the tape. (more…)
1.Price is everything.
2. Ignore the news.
3. Buy a stock when it breaks out of a range.
4. Sell a stock when the trend changes.
5. Buy a stock when it makes a new high.
6. Short a stock when it makes a new low.
7. It’s harder to short stocks than it is to buy stocks.
8. Some stocks trend more than others.
9. Diversify when you can.
10. Ignore the whipsaws.
11. Don’t chase the market.
12. Let your winners run.
13. Cut your losses short.
14. A stock can always go higher and always go lower. (more…)
Unless you can watch your stock holding decline by 50% without becoming panic-stricken, you should not be in the stock market.” – Warren Buffett
A good starting point to gauge investment performance is to compare your results against a simple buy and hold portfolio.
While there are certainly ways to improve the performance of buy and hold, there are many more ways to make it much worse. You have to determine if the effort and actions you take with your portfolio strategy are worth it when compared to this simple (but not easy) alternative.
Investors generally fare much worse than buy and hold so this is an important decision for the average investor to consider.
When you hear about the average long-term gains of 9-10% in the stock market you must remember that those returns contain every single type of market environment. That means high valuations, low valuations, high interest rates, low interest rates, high inflation, low inflation, bubbles, recessions, booms, busts and everything in-between.
It’s an all-inclusive number that contains the good and the bad. (more…)
-Technicians believe that there is wisdom in price. That price has memory. That people who were inclined to buy at a certain price are somewhat likely to buy there again. Unless something’s changed, in which case their failure to re-buy (or buy more) at that formerly significant price level can be interpreted in an entirely new way – what was once an area of support on a chart becomes an area of resistance.
-Technicians believe that trends persist, in both directions, because market participants act on “news” at different speeds and act more boldly (or fearfully) the longer a particular movement in the markets goes on. This is why bull markets often end with a buying crescendo in the riskiest securities. Risk appetites grow as an uptrend persists, the desperation to participate gets stronger, it does not fade gently.
This is also why selling becomes more fierce when the market is at a 20% discount to its previous high than when it is at a 10% discount. “How could it be even more urgent to sell down 20% than it is down 10%?” someone would ask. Going by fundamentals, it isn’t. But investors only pay lip service to fundamentals. What they are more concerned with is owning less of the thing that looks stupid to own – and the lower it goes, the stupider it looks.
Unless you buy into the idea that rational behavior rules the investment markets. In which case, you’re reading the wrong writer
-Technicians find truth in price, rather than attempting to parse the impossibly conflicted and intentionally obscured opinions of the commentariat. Technicians find meaning in the actual buying and selling activity happening today, not in the dusty old 10Q’s of 90 days ago or in the projected estimates being bandied about among the discounted cash-flow analysis crowd on the sell-side.
But above all, technicians respect the power of sentiment more than their fundamentalist counterparts. And sentiment, after all, is how valuations actually come to be – the P in the PE Ratio or the PEG Ratio or the P/B calculation. In the real equation, the only one that counts, the P is what pays, not the E, not the EG and certainly not the B. Buffett would tell you the B (book value) is what pays over time (the market going from a voting machine to a weighing machine). But Buffett can afford to ride it out, having permanent capital under management and an ocean of insurance premiums sloshing in over the transom every hour of the day. Most market players do not.
“I become quicker and more defensive. I am always thinking about losing money as opposed to making money.”
“Risk control is the most important thing in trading.”
“Don’t be a hero”.
“Don’t have an ego.”
“Always question yourself and your ability”.
“I am more scared now that I was at any point since I began trading, because I recognize how ephemeral success can be in this business. I know that to be successful, I have to be frightened. My biggest hits have always come after I have had a great period and I started to think that I knew something.”
“One of my strengths is that I view anything that has happened up to the present point in time as history. I really don’t care about the mistake I made three seconds ago in the market. What I care about is what I am going to do from the next moment on. I try to avoid any emotional attachment to a market.”
“I never apologize to anybody, because I don’t get paid unless I win.” (more…)
1. Secular cycles are driven by the inflation rate (deflation, price stability, and higher inflation)
2. Secular bulls occur when P/E starts low and ends high over an extended period
3. Secular bears occur when P/E starts high and ends low over an extended period
4. Cyclical bulls and bears are interim periods of directional swings within secular periods
5. Cyclical cycles are driven by market psychology, illiquidity, or other generally temporary condition(s)
6. Time is irrelevant to the length of secular stock market cycles
7. Secular bulls require a doubling or tripling of P/E
8. Secular bears occur as P/E stalls and falls by one-third to two-thirds or more
9. When real economic growth is near 3%, there is a natural floor for P/E between 5 and 10, a natural ceiling around the mid-20s, and a typical average in the mid-teens
10. If economic growth shifts upward or downward for the foreseeable future, the natural range moves upward or downward, respectively
11. Inflation drives P/Es location within the range; economic growth drives the level of the range
12. The stock market is not consistently predictable over months, quarters, or periods of a few years; the stock market is, however, quite predictable over periods approaching a decade or longer based upon starting P/E