Reboot

Spring Break
Hey.  I'm back after being away a long period of time.  I have no one particular reason for not blogging.  I have certainly been busy with family matters.  I also went south for spring break this year for the first time.  I have been busy with different things, but not so much with the blogging.  I suppose if I were more organized  I would have had some guest posts, or I would have had enough posts put together that I could schedule them in advance so they would appear at the right time.  I could also make better use of links to other people's blogs and other items in the media and in the news.

Interest Levels
So here's the thing - I enjoy doing my own thing but I also feel a need to help others and share what I have learned.  We all need purpose in our lives.  Lately, however, I have been feeling that I don't really know how much I am actually helping other people with this blog.  I also run an investing club, and I have to say, I'm getting less than a great response there, also - not a whole lot of interest, of late.

Consistency
When I look at the reasons why that might be the case I think it probably boils down to one thing in particular and that would be a lack of consistent results.  If I could consistently show money coming in from month to month, no matter what, and have a track record to prove it, then, I think, people would be a little more interested in learning the ins and outs of how to do the same.

What To Do?
Why do I even care?  I care on a number of different levels, but mostly I go back to a discussion I had with an old friend at a car dealership, of all places.  I was waiting for my car to be serviced, as was he.  We got talking about the downturn caused by the credit crisis and what is now being called the Great Recession.  He was lamenting the amount of money that his portfolio was losing.  In fact, he said he was pretty much afraid to look at his statements because he didn't really want to know just how much money he had lost.  At one point, he turned and asked me, "What else is a person supposed to do?"

DI4Y?
I felt like I had an answer to his question.  My suggestion would be for him to become more of a do-it-yourself kind of investor.  In my experience, the financial services industry is out to make themselves as much money as possible.  When it comes to making us anything, in return, its really not a concern of theirs.  However, given the lack of a  bullet-proof, step by step approach I could offer, I had to agree with him.

Market Direction
Last year, I started to revisit my methodology and to do some additional research in what I know to work.  Looking back, now, I think the main reason I've found for the inconsistencies which I sometimes experience in my own approach is not paying enough attention to the direction of the market.  While there's different ways of determining the direction of the market, whether it's up, down, or sideways, getting that right is the first step.

Duh!
Having done that, the biggest thing which I've learned from my research over the past several months is that one needs to be investing consistently in that market direction.  To try to make money betting against the market, no matter how good the opportunity seems, creates inconsistent results in my returns.  It may seem to many as a no-brainer, but it is the largest factor which explains the variance in my results, to date.  I'm convinced it is the one change that will allow me to improve going forward.  Whether or not I'm right, I have to say that the results always end up speaking for themselves.

New Start
I am going to reset my monthly stats at this point in time, and we will start all over again at zero from the point that I make my next investment and going forward.  These investments will be the same ones we make with the money in the investing club of which I am a member.  It is a new start/beginning and I would invite you to follow along with me as I put my latest improvements to the test.

Care to share something with others you have learned about the markets during the past year?

Bearishness

Click To Enlarge

Risk On; Risk Off
My desire in writing this blog is to share my years of experience in the stock market in the hope of helping others to be successful.  My approach has evolved over the years, and continues to, as the opportunities arise.  Currently, I am trading Exchange Traded Funds (ETF's), rather than individual stocks.  Lately, the market has all but ceased trading on fundamentals, and is following some irrational "risk on", "risk off" approach.  ETF's add diversification and more predictability during these highly volatile times.

Nothing To Show
Because of the market volatility I am trying to develop more of a trading methodology, with mixed success.  Since I am not at the point where I feel this would be helpful to others, I decided earlier in the year to share my investing club trades in this blog.  The problem is there hasn't been any trades.  Prior to the end of last year we purchased two inverse ETF's.  One makes money as the Nasdaq goes down, and the other as the TSX goes lower.  We are also holding some silver coins.

Moving Averages
None of those positions in our investing club has proven profitable, year-to-date.  With the exception of the Nasdaq, neither has there been any longer term signals which would justify reversing these positions.  You might know from other posts on this blog that I recommend using the 200-day moving average to manage risk.  The TSX has been below its 200-day moving average most of the year except for a brief high it made at the end of February.

Invest Responsibly
I have three reasons for remaining bearish.  In order to take a responsible and more conservative approach, I am not going to recommend bullish trades to my readers or to members of my investing club while the TSX remains below its 200-day moving average.  While I might take a more aggressive approach with my own personal money by making very short-term tactical trades, sharing those would not be helpful to people who aren't sitting in front of their online investment account all day.

Long Term Trends
Secondly, long term trends are negative.  The deleveraging required to restore government budgets and remove most of the unnecessary  risk in financial markets is going to take years to come.  Demographics will not substantially improve before the end of the decade.  If we look at the U.S. markets they have already reached a peak according to the Elliott Wave theory.  Trust in government intervention is almost all that is currently propping the markets up.  Wait until everyone wakes up to the fact it isn't going to make any real difference!

Head & Shoulders
The third reason is the technical pattern called a Head and Shoulders which the TSX is making.  This is a very bearish pattern which, if we break the horizontal neckline just beneath the recent lows, it could mean a possible return to our 2008/2009 lows.

Cash Is King
I know there is a segment of investors who would scoff at my lack of returns this year.  They would say four or five percent dividend returns is good in this environment.  Those are likely the same people who lost half, or more, of their life savings during the last great recession.  Let's see - four percent upside and 30 percent downside, that is not a bet I am willing to make.  As for not knowing when to get back into the market, I know where that point is, and it is NOT here, except for very short-term tactical trades.  In the mean time, my funds are mostly in cash, thank you very much.

That is my outlook.  Does your outlook differ?

Trading Stocks

Trader, Not Traitor
I remember one analyst on BNN in particular as he looked down his nose at the commentator and said, "I am not a trader (emphasis on the NOT), I invest for the long term!"  In other words, he was better than any trader.  Trading, to him, was for the amateurs.  At the risk of repeating myself, surely you and I are playing a different game than any fund manager, let alone the talking heads that appear on television.  The major difference being, what they make from their stocks is mostly a side-show for them.  Most of them are compensated six ways to Sunday and get paid regardless of how well their stock picks are performing.  I have also seen analysts on TV who don't even have any of their own money in stocks!   (Conflict of interest LOL!)

Do No Harm
This blog is about my sharing what I have learned over many years of playing the markets.  I decided at the beginning of the year to publish my trades as teaching moments.  I hesitated to do so for a couple of reasons.  One, was because one trading style does not suit all.  Another was because my time horizon has become increasingly shorter.  I trade during the day.  I don't want to put people behind the curve, trying to imitate me while they can't get in and out as easily as I can.  I cut any losses extremely quickly in the current environment.

Bad To Worse
At that rate, I don't see the benefit of me sharing my trades with the average person trying to buy low and sell high as a means of making a reasonable return in these markets.  The regulators forgot the meaning of their role a long time ago.  High frequency traders manipulate prices in the name of so-called market liquidity.  Highly leveraged Exchange Traded Funds (ETF's) change how markets function.  Dark pools exist for the wealthy fund managers to hide transactions from the average investor.  Derivatives cause nuclear level shock-waves in the markets.  The rules put in place after the Great Depression to prevent it from ever happening again have either been revoked, or totally ignored.

Looking Ahead
Does that mean I think the personal investor should just give up, take what's left of their money and go home?  Not at all.  It just means keeping an eye on what's going on.  With the rate of change in technology and in society, obsolescence is guaranteed.  Buy and Hold has as much chance succeeding these days as the horse and buggy did outlasting the automobile at the turn of the last century.  Nortel, and Research In Motion are recent infamous Canadian illustrations of what has become the half-life of modern day success.

The Goldilocks Solution
If Buy and Hold can't work, and day trading is overkill, then what is today's personal investor to do?  In looking for an answer, I thought about the investing club I started.  If anything, it perfectly illustrates the need for a Goldilocks solution - neither too hot, nor too cold.  Investing clubs do not lend themselves to day-trading, and most fail to make money or serve to educate if the time horizon is too long.  My solution there is the same as here - use technical analysis to decipher medium-term trends and trade (yes, trade!) accordingly.  As a result, the trades I share on this blog are the trades we are making in my investing club.

Next Time
I want to remind people that I am not a professional, and as such cannot advise others what to buy or sell.  However, I have no difficulty sharing with others what I am doing, in the hope of serving as an example.  Next time, we will take a closer look at how we trade in my investing club.

What is your strategy in this changing and evolving environment?