< Now who does that make me think of.....> Reality Check time !
hmmmm - keyword here diana g, is -- "THINK"
<<I notice that when they get it wrong, they seldom admit it.
They just show up later with new predictions and no mention of past failures, or else distorted tales of their past calls.>>
....now time for a lesson in REALITY here folks: The single biggest mistake that is made here is letting ''emotion'' cloud the cold, stark reality of logic.
I will not take a lot of time revisiting the 4-peat OSX trading range since August of 45 to 72 of late here. Many of us, have traded this range; while no one could, or did; trade if perfectly - many of us reaped substantial portions of the profits during these runs; not to mention the numerous individual trading opportunities.
My entire point here on ''Trading'' versus - Buying & Holding is grounded in cold, stark reality - not shaded by the Rose Colored Glasses of Emotion that rules here...
To come up to speed; the recent debate has been on my taking profits here of late. - Slider missed the boat, Slider you sold too soon, Slider you're a short (perhaps occassionally, very, very occassionally) - actually shorting is the epitome of logic vs. emotion. Think about shorting - why is it ANY different than being long, if the fundamentals, or market changes warrant it ?
Lets rewind the tape a bit here. I started selling (yes you have to use the ''S'' word to make money too) and taking profits heavilly on the OSX stocks at the end of March when we broke OSX 68 and rotated allmost entirely into the E&P's on the recent break of OSX 70-77 on friday April 16th to Monday April 19th.
Here are the facts - the cold, hard reality - no emotion; just the numbers. My E&P ''rotation'' versus the OSX. This chart over-exaggerates the OSX's gains - as I can not use just a chart from April 16th - the superiority of the E&P gains are even larger, from the actual point of April 16th
techstocks.com
Why did I pound the table on the E&P's ? Why did I sell/take profits in the OSX ? Why do I refer to the situation as an ''anomaly'' ? Why was this a virtual - ''No Brainer'' ?
#1. Risk vs. Reward
We had a total ''anomaly'' between the OSX stocks and the E&P's.
We had one subsector with rapidly rising shareprices , but still actual deteriorating fundamentals (rig utilization, dayrates, backlogs and earnings). We had another - with flat, deteriorating shareprices, but actual rapidly improving fundamentals (Oil & Gas prices - earnings & cash flow) !
...now how damn hard was that one to figure out - DUHHHHHH ! ...and many of you doubters here, do deserve a great big ''DUHHHHHHH !
The story here is not that I wish to rub anyones face in ''my gains'' verus ''your gains'', or that I am God's Gift to Trading - but the undeniable fact that - You took on needless RISK ! You also missed one of the great anomalies in history - an opportunity to shed risk and double gains !
RISK - perhaps one of the most important concepts in investing and one that has been totally lost from the vocabulary of late here. This rotation/profit taking was not about calling/predicting the exact ''top'' in the OSX, or exactly how, or when, the Market would react to OPEC's compliance numbers - all of those go into formulating a ''Trading Plan.'' I had my thoughts on these issues - but they are not what actually determines my gains, or losses; what does is how I position my self and how I react to what the market does -that's what determines my gains, or losses.
The story here is positioning oneself, in the best risk vs. reward position and allways taking an overweighting into any market ''anomalies'' that exist. I also reacted further, by going to a near total E&P weighting due to the markets reaction of taking the OSX yet higher into negative fundamentals - and where higher yet Crude prices actually widened the logic/reality -value/fundamentals gap in E&Ps from the OSX stocks.. By taking 90% of the present OSX profits (selling from OSX 68-77) and rotating into the E&P's - seizing a ''no-brainer'' risk vs. reward anomaly; I positioned myself to first; not miss a run - if I am wrong on the Street selling off into the good news on OPEC's initial compliance report. - the E&P's have more actual momenteum here (surprise ! - look at the damn charts again !) and they also have more fundamentally leveraged upside to continued rising Oil prices - hello ! - I win on both sides of the bet. By staying in the OSX stocks - I give up ''locking in 90% of the runs profits'' - number 2, I take on the risk of a Crude Selloff - which leaves the OSX with both falling Crude Prices, but also, with still deteriorating actual fundamentals - there would be NOTHING left to keep the OSX gains propped up !
The E&P's were still lagging (still are) sharpricewise - and the Natural Gas overweighting also gave me some hedging against OPEC's influence of Crude prices. For 60% of my portfolio - it did NOT matter what OPEC did - as OPEC does not control US Natural Gas prices ! - again; I am reducing risk ! Sure, I had my thoughts, predictions on what OPEC and The Streets reaction to OPEC would/will be - but that is for conversational amusement - positioning ones portfolio and having a plan & executing it - that is what determines the profits & losses. Anytime you can position your portfolio and also, simultaneously reduce risk - let alone when you can lock in huge gains - JUST DO IT !!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!
Emotion clouded reality here. We had emotion focusing on rising Oil Prices, but logic showed us deteriorating fundamentals. Rising Oil prices do absolutely NOTHING - nada, zip - for the OSX stocks; if the International Oil Majors decide to not spend money ! If they stick to their Cap Ex Budgets and continue to ''doubt'' the SUSTAINABILITY of Crude Prices - it doesn't matter if Oil is $30 ! When I wrote a post - titled --- ''It's the Cap Ex Spending - Stupid'' - this was when I was met with a round of jeers, insults and jabs from SargeK and Big Bull et al. No two better posterchildren for the Emotion Investors there....
Lets also compare not just the OSX, but 3 of the Oilpatch fav's here as well; FGI GIFI UFAB; to the actual portfolio holdings of mine most heavilly weighted :
techstocks.com
From the time of my selling/profit taking:
OSX ................... + 24%
fgi ufab gifi - fav's.. + 33% avg.
Slider/E&P's ......... + 72% avg
hmmm; 3 times the OSX gains - 2 1/2 times the fav gains; PLUS - I locked in 90% of the OSX's gains; and let's rub a little salt in the wounds as well; add the profits from the individual trades posted in FEN HMAR BEXP MEXP CLB HLX ...etc. - these were the big blowoff moves - triple in FEN, 50% - doubles in the others...
Buy & Hold versus Trading ? - emotion, or logic ? Well in volatile times - logic says Trade 'em ! Lets all face reality here; we ''trade'' anytime we decide to enter a sector, make an inital buy, buy more, sell - take profits, rotate, or cash in... Volatility = opportunity. The more volatility - the more opporunity. The time to buy and hold - is when the spread between the highs & the lows - does not offer a positive risk vs. reward benefit for the potential gains. In a normal, historic year of a 10-12% market, or sector move; then buying and holding makes sense. In a market like this - where we have literally had 5 years of profit potential in 8 months - TRADE !
NEVER, has there been a better risk vs. reward profile for trading - never !
What happened here is that most people missed seeing the Forest for the Trees. They focused on Oil Prices - not fundamentals. They saw the Trees (the OSX gains), but missed seeing the Forest (the even better E&P gains & fundamentals) .... the initial heady mo-mo move got everyone all wet here... ohhhhh the emotion flowed ! But, very few stood with ice water in their veins and stepped back; focused on logic and reality - not emotion; and saw the Forest and not just the Trees.
Profits are not profits unless you take them. You can not truly have anything to logically celebrate unless you SELL ! Profit taking here is more important than buying ! - don't agree ? Well, lets just revisit ''History'' here.... 4 times + - we had people who could have timed the exact bottom - hold; and lose every dime they made. Only by selling could you lock in these gains and have ANY real profits. We had 4 opportunities to re-buy cheap, or cheaper here of late - but if you never SOLD- what do you actually have ?... paper profits; no more - no less. Also, does anyone ''really'', logically think that the volatility here is gone ?
I don't know about you; but where I come from - celebrating paper profits is like kissing your sister... I don't get too excited when I'm winning at half time, or when I have 2 strikes on Mark McGwire - I choose to celebrate after McGwire takes the long walk back to the dugout on Strike 3 and grabs some bench, or after the final whistle blows - not the half time one...
Next Lesson - taking the DARKSIDE to reduce risk and increase profits...yes, the darkside..... watch it happen. - Long the logic stocks - and short the emotion stocks - I will once again, leverage my gains here...
Anyone who read this today; and does not have a profit taking, risk reduction plan - is clueless !
biz.yahoo.com
LOS ANGELES, May 3 (Reuters) - Baker Hughes Inc. (BHI - news), the world's third largest oilfield services company, said on Monday it expected a 17 percent decline in its rig count in the second quarter, in addition to lower revenues and profits.
hmmmm; OPEC compliance report setting up a probable/possible - sell into the good news event - crude futures at an acknowledged, speculative, euphoria top; combined with Q2 - warnings....hmmmm, and you guys want to hold here ?.....okie dokie ---- time to take your money again (VBG) !
.... keep the barbs coming - I light a $100 bill every time I actually like one.... kind of a superstition-Voo Doo thing (VBG) ...
Hoooo Hahh ~ all the way to the bank BABY !
$lider |
