>>FA has been ineffective for quite some time, especially in tech. Momentum trading off the charts has been and is the only way to not get bankrupt trading tech.<<
You may have to be awarded the quote of the year for that one and I couldn't agree more. I recall buying a tech last year on FA and getting the snot kicked out of me for weeks. I refused to budge being so sure I was right. The loss in gains by having my money tied up in it hurt me in a way. Finally the stock was "discovered" and it shot straight up. I sold too early and missed out on half the gains although I did nicely on it because it then went from undervalued to grossly over valued.
I firmly believe FA ALWAYS wins in the end, but it makes for a lousy timing tool. FA would have had you out of the market for the last few years while TA at least lets you play dangerously and profit as long as you don't believe the spin. You also can't get caught up in the mania to the point you lose sight you are playing a dangerous game where the stocks you are trading are no longer a piece of a company but rummy paper worth only percentage points of what you are paying. You have to hope through the use of TA that there is a greater fool out there that will pay more than you over paid and it has worked for years.
I have had this discussion numerous times with friends and co-workers. I think it all comes down to capitalization and time frame. if you are Warren Buffet with loads of cash and the time and patience to wait, you can buy out of favor stocks with good FA and wait for them to be discovered. Your mney may not make anything for months or even years. However if you have been doing this for a long time and have the cash to keep adding, eventually you come out the other side and one after another, things you bought long ago climb as the story unfolds and they are suddenly favorable again. Eventually you always have something going up strong so you can just move the cash from one gain into another opportunity. Imagine the gains in those that could buy the R2K the last few years and got that double this year while the bigger caps were getting toasted. How about insurance stocks a few years ago, cyclicals last year, oil and natural gas this year, etc.
For the rest of us who don't have billions to allow scattering buying all over the place and those like me with no patience, we have to get in fast as TA says the time has come and try to catch the trend changes as quickly as possible then move on to a different vehicle with the same cash when our current one stalls and something else gets hot. I think much of the Mo MO mentality is the smaller capitalization of the small time trader trying to maximize gains. The big money can't move as quick and is more FA based. That is also why there are bigger problems now in Mutual Funds. Lately they have been trying to play the small guys game which only accentuates the moves making the highs and lows farther apart as mounds of money slosh around from one pile to the next.
JIL - Good Post. Well thought out and highly likely. I too think the economy is fine and will chug on even if the landing is a bit bumpier than the market would like or expects. Employment is so tight a few layoffs would actually be a good thing ( from the market's perspective not the individual's of course). Higher unemployment would ease inflation concern and yet not impact demand unless it got severe. You are correct in that foreign money really doesn't have a whole lot of options for places to go and almost has to keep some here as we at least have growth and don't get invaded, have some sort of regulations governing investment keeping risks lower than third world investment etc. As for AG, well if I were him, I would have an axe to grind. He warned everyone looong ago and was ignored. Now everyone wants him to save them from their self made bubble. He will ease his bias and will likely back off some this month at least in the bias. However, if the market shoots up and resumes it's foolishness, he may not actually cut the rate until the market settles back down or at least feels a bit more pain. Again, FA needs to be the reason for stock buying, not pie in the sky fantasies of QCOM owning the world or NTAP selling a giant storage device to every home in America. All the fools and thier money have not been parted yet so there is still work to do.
Good Luck,
Lee |
