Thursday, May 24, 2012

Three Phases of Investing

Wondering whether it is possible to safely invest in stocks, commodities, or whatever asset class one may be examining is tough for pro and amateur alike.  Facebook is a classic example of investors so desperately wanting to believe they had an opportunity to enter an almost riskless trade because they were certain of " This Equals That" or what I call the TET reflex. 

One could say TET is what we rely on every day to assess problems, observations, and opportunities.  Facebook's automatic TET reflex glided through home, office, and financial industry circles with an absolute impatience for the normal processes involved in IPOs.  But alas, the Facebook IPO bombed for everyone except the dweebs who were already made.

Here were the three normal phases of the TET reflexes for Facebook investors and all investors for that matter.

Phase 1.  This is the big one. 

Wealth now or die.

Phase 2.  Why isn't this working. 

This starts when you realize maybe you've been hosed and red marks start appearing on your face, reflecting from the computer screen as you watch your investment go negative.   

Phase 3.  It's someone else's  fault.

This final phase occurs when all hope is lost for the quick score and you begin to organize lists of the responsible.  You are not on that list.

There is a reason you are stupid.  It is is rooted in the belief there are growing opportunities in a de-leveraging world.  There are not. 

Key lesson here. 

You better already own it early and be prepared to wait a long time to be successful.

Thursday, May 17, 2012

Range Bottom Forming

Range bottom in equities is being established today as negative market chatter gets ahead of itself in Europe and banking fears from JPMorgan trading.  Greece does not really matter because there really is nothing new here.  When debt holders had to take 90% hit months back, it was over.   EU will create some trash solutions but in the end it will accommodate survival but lead to slow growth.   Same for Spain.  Solutions which lead to sluggish economic gains.

JP Morgan is a non event as far a scale of loss.  It will add to a extremely modest uptick in regulation.

Interest rate swings within the lower range will be great in percentage terms but modest in terms of significant impact on higher rates. 

Friday, May 11, 2012

Surprise Index

(From Bloomberg).  The Citigroup Economic Surprise Index for the U.S., a gauge of how much reports differ from economists’ estimates in Bloomberg surveys, turned negative on April 25 and fell May 3 to the lowest level since September. Last year, the gauge sank below zero for the first time in five months on May 2, the day when the S&P 500 began a 19 percent drop.

Tuesday, May 1, 2012

It Hurts When He Thinks

Alan Greenspan thinks stocks are cheap and likely to rise.  This from a guy that help create one of the worst economic downturns in the history of the United States.  Now except for his only lucid moment when as Chairman of the Fed he characterized market behavior as "irrational exuberance" in his testimony before Congress, he has always been a shill for Wall Street.   A tradition not lost with Bernanke.