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Author: trader2012 Big red star, 1000 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 35351  
Subject: Re: A Part-year Portfolio Review Date: 5/1/2012 7:50 PM
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Howard,

I can't predict the future, either. But I can do contingent planning of the sort "if a bear market happens, e.g., a 20%-40% decline from present prices such as did happen in 2008-2009, how adversely would I be affected? If a 60% decline happens, such as happened in '73-74, how adversely would I be affected?" Basically, it would make no difference to my life-style. I'd have fewer pieces of paper, but needs and reasonable wants could still be met from remaining resources. So I'm fairly indifferent as to what will happen. However, those kinds of prices declines would represent too good an investing/trading opportunity to ignore, and since I'm relatively sure they will happen --and soon-- I'm scrambling to position myself to be ready for them. Should I be wrong and they not happen, then my investment gains will continue to be what they presently are (net-positive after taxes and inflation,) and all is just as well. So it's a win-win scenario *provided* I do my prep-work.

Yeah, the trading game is a tough gig (been there, done that). You’re competing against high-frequency traders and investors privy to inside information. On the other hand, I find "long-term buy-and-hold investing" much easier, enjoyable and also more rewarding.

For the most part, I disagree. An investor's (or trader's) worst enemy isn't his or her counterpart to the trade, but her or himself. That's who screws up profits. That's who creates losses. It's not the high freq boys, nor the "insiders", nor anyone else. It's one's willingness to deceive oneself as to what is really happening and to let Fear and Greed, Hope and Despair, do one's decision-making instead of rational, systematic action. Markets aren't a level playing field. Never have been; never will be. But a determined individual can always pull more money out of them than he/she brings to them. Not on every trade, and not on every market day, but on average and over the long haul, one's purchasing-power can be preserved or appreciated *provided* the planning is sound and the effort is systematic.

You can call that 'investing' or 'trading' as you choose. But I see no material difference between the two, because market time is fractal. In both cases, the intention is to profit from price differences, not from the supposed "organic growth" that supposedly creates the upward bias for equity markets that the B&H'ers piously appeal to to bail them out of their mistakes. Markets are a less than zero-sum game that less than 15% of participants win. The trick is to figure out how not to be one of the losing 85%. Against all odds and advice to the contrary, I did it with bonds. Whether I can do it again with another asset-class remains to be seen. I think so, because I'm betting that the opportunities on the short side will soon be as obviously as the pink and white cherry blossoms that litter the landscape on a windy April day. How could they not be seen and enjoyed?

Charlie

PS There's a much-told econ joke that goes like this. "A recession is when your neighbor loses his job. A depression is when you lose one." What, really, is the present unemployment rate? Probably somewhere around 23%. But that is being papered over, literally, by the Gov't's printing presses and its ministries of economic propaganda. 2% GDP? How much of that is real economic activity as opposed to the spending of publicly or privately borrowed money? When the US dollar loses its reserve status, which will happen in our lifetime, the charade is over that the US economy is viable. Martial law will be imposed, and the US will use its troops to suppress rebellion, as has happened many times before in this country. But trout will still rise to a fly, books will still circulate, and markets will still trade. So the essentials of life will endure and, eventually, it can be hoped that the needed reforms (now being kicked down the road) will be enacted because, finally, there will be no other choice. American "exceptionalism" will finally be seen to be the foolish self-deception it is, and economic realities will replace them (at least for a while). Is that a dark grim vision or a hopeful one? The proper answer is "Yes", and it's John Mauldin's "Yes", not my own. "Pain now, or pain latter?, he and his dozens of macro-econ charts ask, none of which I contest. Things really are bad, and papering them over, as the Fed/Treasury cartel has been doing, is only postponing the inevitable reckoning. One could fear that reckoning and hope it never comes, or one could say that it has already begun and begin to get in synch with it, looking for ways to profit.
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