Silicon Investor (SI) -- The First Internet Community

STOCKTALK

We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor. We ask that you disable ad blocking while on Silicon Investor in the best interests of our community. If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.

Politics : High Tolerance Plasticity -- Ignore unavailable to you. Want to Upgrade?

To: bull_derrick who wrote (22894)	3/12/2005 12:04:51 PM
From: kodiak_bull	Respond to of 23153

BD, I assume you actually addressed your response to me. I can't disagree with what you posted. But for me at this point I can say (and experience, even our shared experience with UTI and PTEN 6 years ago says): don't take trading signals off FA or traditional (that is, wrong) TA. Figure out a different (yes, mechanical) way to get signals. On the USD/Euro, we have a 4.2 year downtrend in place. How to determine an entry? You can see that it is in the dead center of a downtrend, you can take your signal from the fact that it has taken out its previous low (working off a breakout) and commit funds now, or wait for a trader's entry when it pulls back up to the upper part of the channel. Could you counter-trade the bounces, that is, go long the dollar on each plunge and get out with significant trading profits? Yes, in hindsight, we can see excellent go-long signals that would have made money. Problem is, in fighting the trend, it's extremely dangerous to even attempt it. It's not exactly like trying to surf out to sea, but it certainly appears to be like trying to paddle against the current. In terms of cyclicals, I think you have a valid point as to predeterminingg some areas to watch. When copper made cyclical lows in its pricing in '02, it was an excellent entry point for PD. However, it was only halfway back to the previous bottom (if the charts I'm looking at are correct). Those who waited for the FA bottom (retrace to the 85 low), or who believed that in the new clicks 'n bits information age, all commodities were foolish plays at best, never got to ride the trend. Who on a fundamental, cyclical approach, would have bought into the on-life-support steel industry in the bottom of '03? X's stock price was at an all time low and it produced a stupid, heavy, clunky commodity (steel) and wasn't even a sexy producer such as Nucor or SCHN. Yet in just 2 years you could have made 522% on a straight equity investment and an easy multiple of that with safe option spreads. Kb

To: bull_derrick who wrote (22894)	3/13/2005 9:42:20 AM
From: Bruce L	Read Replies (2) \| Respond to of 23153

bull derrick, Absolutely superb post!! Highlights as I saw them: - "Where I do believe the best money is made is in long term trends that are macroeconomic." - "I put about 80% weight into the statement of cash flows and perhaps 10% into the income statement and 10% into the balance sheet. Cash doesn't lie unless ..." - "What macroeconomic events are driving the current state of the economy? Interest rates are going up and the dollar is weak. There's two years of play there in that trend, so basing ones investment decisions on that should be appropriate... " - "These are the general macroeconomic terms that I foresee over the next few years and I should ask myself if my investments are aligned with that type of scenario." Conclusion: 2 or more years in these trends and I want my portfolio ALIGNED also with these scenarios. Thanks, Bruce

To: bull_derrick who wrote (22894)	3/13/2005 9:08:38 PM
From: kodiak_bull	Read Replies (1) \| Respond to of 23153

Derrick, I was out in the fine weather today thinking about this elongated FA vs. TA vs Trend vs Breakout discussion and it struck me that we are debating only 10-15% of the investing/speculating question. Speculation involves these steps: 1. Capital analysis 2. Capital allocation 3. Selection of instrument and entry 4. Position management 5. Stop loss management 6. Exit rules Let us assume that #3 is the only thing that FA/TA has any impact on (yes, of course, if some FA piece of data changes and you must exit a trade even though price is not reflecting the change, but those events are so rare as to be non-existent--by the time that data is out the stock has soared or collpsed against you). Most successful speculators, once they are in a trade, use stops to allow the market to prove them right or wrong. Those who don't, won't be speculating for very long. So we are saying that to select an instrument and to "buy" it (I use "buy" here for buying calls or buying puts in any sort of combination, and also for going long and going short, although technically going short isn't a buy) we must use a signalling system. Once we take the signals, whether it's a change in cash flow, a prepackaged bankruptcy announcement, earnings increases or decline or a change in a "technical" indicator, all good speculation is the same. You watch your capital, your position size and adjust your stops to take you out of bad trades and keep you in good ones. If that is the case, and even stipulating that someone could devise an FA system to give good signals, since it is so much easier to flag and enter non-FA based signals, why would anyone want to go through the backbreaking work of scouring FA for changes? Ed Seykota said once, and it has a certain Zen like brilliance to it: "Win or lose, everybody gets what they want out of the market. Some people seem to like to lose, so they win by losing money." Ed also said, "Fortune tellers live in the future. So do people who want to put things off. So do fundamentalists." And there is this anonymous quote, which has a lot to do with speculation and our analysis, although you have to think about it a lot to see it: "The past is history, the future--a mystery. Today is a gift--that's why it's called the present." Kb