Taking Stock: Things Learned

(note: this is subject to further editing)

I have learned a TON of things about investing and trading this year!

Trading and investing, while not necessarily difficult, takes time, patience, and plenty of learning. You have to be ready, willing, and motivated to keep learning new things.

One of the things that I have noticed about investing that can be difficult is knowing what to learn and from whom, or even if there is any one set of topics to learn. I think it is something that can prevent people from getting interested and involved.

Granted, I take Jim Cramer with a grain of salt, he can be a good starting point for getting interested in investing and learning more. My problem with Cramer is that he is too erratic. One week he will be for something, and the next he will be against it. He is great for ideas, which is what I use him for, along with a sort of secondary opinion.

-I started learning about and using Technical Analysis indicators earlier this year.

I like quite a few of IBD's list of rules:

I don't like most of Jim Cramer's rules, but there are a few good ones:
1.) Buy damaged stocks, not damaged companies

I have found some of his pointers to be helpful:
1.) "Penny stocks are penny stocks for a reason"

There are a portion of Warren Buffet's guidelines that I like:
1.) Don't buy it if you do not understand it. - If you don't understand the company and what it does, then it will be difficult to follow the story.

I have learned some things from Dan Fitzpatrick, and his pointers are helpful:
1.) "Don't lose your dough"
2.) "Don't be the first one out of the foxhole"

"Buy and Hold" does not necessarily work anymore. You have to trade in order to make money. That is what I used to do. While I luckily did not lose much, I didn't really make much either (financial/credit crisis and deflationary period excluded).

-How to spot, watch, and be patient with trends in a stock

I learned to watch volume, and recognize patterns (flags, pennants, etc.). The price of a stock is not necessarily directly proportionate to the number of buyers. Patterns are not hocus-pocus, but only resultant of something called crowd psychology.

-IBD (William O'Neil) trading signals (2X volume, Confirmation, 200DMA, etc.)

-200DMA rule examples (ADM, BEAV, BUCY, CTV, UPL, RIG)

-Have been made a believer out of the necessity of using T/A
-describe money management
-There will be times in which an event will occur, but you won't realize it until after the stock has sold off considerably

-Find, recognize, and use the opinions of others that know more than you, then use that to learn from.
-When knowledgeable people start yelling "fire!", you should pay attention and investigate further. Having the ability to effectively read and understand balance sheets aids that invesigation.


New Cardinal rules:
-When in a bear market, you should be mostly in cash and only make short-term trades. I realize the difference in how much more I could have made if I had been mostly in cash, and possibly earning interest on that cash.

I already had at least one Cardinal rule, which is to ALWAYS have some cash on the side (10%?), regardless of what kind of state the market is in. There will be times when a stock sells off for an irrational reason, and you will need some cash on the side in order to take advantage of the opportunity.


I'll probobly remember this bear market for the rest of my life.

Things yet to learn, or learn more about:
-Placement and use of Stop Loss and Stop Limits. There is a proper way of placing and using them. I see it as being a form of art-form, and extremely important.

-The Financial System, and associated parts.

-Becoming more savvy at reading & understanding balance sheets. I started a couple of years ago, but never finished. I have found that it even if I don't make cohesive sense of the balance sheet, I can a least glean information and insight from the other portion of the either quarterly or annual report.

Taking Stock: ??

Turnaround? Did I say turnaround? Wow ...

One thing that I can definitely hold up on for this year is that I have learned a considerable amount of new things.

Taking Stock: As the Market Turns

Just in case anyone is wondering, the commodities rally is far from
done. First, I took a beating from the bear market, then the brutal
sell-a-thon in January, and now the commodities correction. I just
can't seem to win this year! UGH! One of my consolations during this
ordeal is the fact that I have been learning a considerable amount of
new things in the midst of my follies, and now another is that the
overall economy is beginning to improve in some areas (financials &
housing). The upside to the fall in oil prices is that it helps fuel
the economy. Although, cheaper oil is not here to stay. I'm heavily
invested in gold and commodities, but mostly gold because of the high
rate of inflation. Granted, gold has suffered a correction, but
inflation will resume because of low interest rates. I agree with some
of the authors of the articles that I have been reading lately, in
that the FOMC is not going to raise the Fed Funds rate anytime soon,
mostly because it could cause the mortgage rates to increase and
therefore hinder the decrease of housing inventories. In other words,
since gold is a hedge against inflation, gold and other precious
metals are not done going up either. Therefore, I'm weathering the
sell-off and keeping my positions. The Economy is a mess, but I see
hints of a turnaround in things such as the positive GDP and the
increase in home sales. I'm still a firm believer in that we are in
the tail-end of a sort of "soft" recession, and that we would have
been in much more trouble if it had not been for the growth in
emerging markets and namely China. China's economy is having a pause
because the Olympics are being hosted in Beijing, which is likely to
continue growing at a breakneck pace after the games have been
completed.

A Thought

Feeling Good <--> Looking Good

Translation:
When you look good, you feel good. When you feel good, you look good.

Taking Stock: Market Outlook

It appears to me as though the overall market could turn around from
here, for multiple reasons:

1. The price of oil has been falling
2. Some of the banks have been stabilizing, such as US Bancorp and
Wells-Fargo reporting good earnings, along with Citigroup
3. IndyMac was taken over by the FDIC (another stabilized bank)
4. The mortgage industry appears to be getting some of their issues
worked out, such as Fannie and Freddie being rescued (roughly 50% of
the mortgage industry)
5. Pending home sales, existing home sales, housing starts, and
building permits have all been rising, along with the mortgage
percentage rate
6. Housing affordabilty is very high now, but housing prices could
still fall a little more.
7. The interest rate cuts by the FOMC should be working their way
through the economy and the banking system.

I'm interested in seeing what the US GDP will do this quarter. The
unemployment rate has not been incredibly high, but it would be nice
to see it come back down. Unemployment insurance claims have come back
below the 400K mark, which is good.

I'm looking forward to earnings season this quarter.

A Thought

Could there be pleasure without pain?

Taking Stock: See?

Just to note that today is a perfect example for as to why I sold as
much as I did last week. There was a broad market selloff today.

I did buy Axsys Technologies (AXYS) back, due to the extremely large
volume turnaround it had on 06/27/08. Hopefully it doesn't start a
downtrend now, which I will find out very soon. To my knowledge,
nothing in the fundamentals of the company has changed.

Some of my other positions sold off today, but I am not incredibly
concerned about them.