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November 23, 2005

The importance of knowing what to look for, Wed., Nov. 23, 2005, 5:27 PM

A couple days ago, a reader commented something to the effect: Bill, I don't know how you are doing this (performance), time and again."

My answer is simple; I can't do any better to communicate to the world " amateur to pros " what I'm doing. Everything is here, as I said it would be when I first started to blog. Nothing's changed. There is no magic.

A couple month's from now, I expect readers will come to me and ask how was it that I knew to go to cash. I mean there is nothing that I do I don't explain here. And in response I get letters every day from traders at CBOT, CBOE, COMEX, and goodness knows where else. People are interested. I hope they are learning.

Every day I see examples of what people do wrong, and I write about it. For example I saw that GOOG was flying today, and the TH's on Financial Entertainment TV were all over it. Hosts, and guests, and reporters, and their friends and friends of friends wanted to drill it home that GOOG is a success. The implication is that you, who missed that particular rocket, are stupid.

Well my parents didn't raise a stupid kid. I understand the game. I know what those TH's are doing, and I'm not buying it.

Have you ever walked down a street and a person was handing out papers or flyers of some kind? Everybody's taken one right? I mean everyone except me. I have never in my life taken a flyer that was shoved in my face. Never.

Why? Because I didn't organize things to happen that way. I didn't pre-select the flyer I wanted to accept, and then just walk by to receive it.

In other words, I don't drink other people's lemonade. Never.

And today there was a lot of lemonade being dispensed.

You have to know what to look for in equity markets. Everything is a story.

Think of it this way: would you possibly tailgate a line of cars at high-speed on a major highway looking only at the red taillights of the car ten feet ahead of you? Well, if do that while going 100 feet a second, you have a tenth of a second to react. Is that any way to live your life?

Although I shouldn't, I have been known to speed; I've been ticketed in Florida, Louisiana, Ohio, and Ontario that come to mind. But I never tailgate " unless I'm watching red taillights of cars five or six ahead, because I like my chances of stopping in 200 feet better than ten.

So again, you have to know what to look for if you want to stay out of trouble. Remember; portfolio management means risk management first, opportunity management second.

All day long, you were being enticed by Pied Pipers. I told you before: I'm no Pied Piper; I'm the Rat Catcher.

The Pied Pipers were telling you one way or another today to buy GOOG. And GOOG was up +$6.39 (+1.53 pct). And I say, ho hum, tell it to Cramer, Booyah!.

I'm not a day trader because most of a good day (while day trading) is taken from me by gap opens, which kind of ruins my chance to make a fair profit on legitimate trading.

But I'll trade over a week or two, and mostly in the stocks of companies I like. Take Yahoo and EBAY for instance.

Today, even with that +$6.39 gain in GOOG that everybody was talking about, the comparative performance of GOOG to both EBAY and YHOO over the past week, AND the past two weeks (of this crazy rally) happens to be pathetic.

EBAY and YHOO cleaned the GOOG clock.

Thank you.

And today when those TH's were blowing smoke up somewhere the sun don't shine, according to the expression, that is when you should have been selling, not buying.

And later when those same TH's are moaning and groaning over a big slide in some of these stocks, if you are careful, you might even buy them.

It's called buy low and sell high. Got it?

Posted by Posted by Bill Cara on November 23, 2005 05:27:45 PM | Category: Trader Tools