July 4, 2009
ETF Newsletter (Paid Issue #22)
When I was a kid, I would fight the market, but now I’m old and wise enough just to follow it. When I see comments on Twitter like, “How can semis still being going up?” or “Natural Gas is the buy of a lifetime!” I shake my head. Just look at the chart, don’t try to think too much. You’re going to overthink yourself right into the poorhouse.
In my weekly ETF newsletter (only $60 to year-end 2009 or $20 for a month), I keep track of the trends and write a brief (200 word) explanation of changes made to the portfolio. If you want to read 10,000 words about what tribal strife in Nigeria combined with backdoor deals between Chinese real estate developers and state-owned banks means for the markets, don’t come to me. I like to keep it simple, stupid.
I am two people away from reaching the lofty 200 subscriber mark, so to encourage green tea lovers to sign up today, I will send 50 grams of outstanding Dragon Well tea to the lucky 200th subscriber in thanks. ACT NOW! :-) … [Special thanks to Dan, lucky #200.]
Here are the details of the borrowers my subscribers and I are supporting through Wokai, a microfinance outfit in China.
July 6th, 2009 at 9:45 pm
Yup, The trend is your friend!
July 7th, 2009 at 9:43 am
More like a trend change. Next few days should confirm any reversals in Nat gas.
Also winter is up ahead in a few months. My all time favorite explanation for the movements in Natty
July 7th, 2009 at 10:56 am
@Joe: UNG hit 12.31 … ignore all explanations and become a slave to the tape.
July 8th, 2009 at 12:16 am
Joe you must be really good at picking tops and bottoms
July 8th, 2009 at 9:13 am
They halted trading on UNG for a little bit today. It’s anyones guess what is next . . .
July 8th, 2009 at 9:29 am
@Donato: Yes, I saw the story. Trail the stop. :-)
July 9th, 2009 at 2:07 am
I hope you haven’t completely given up on value since the wamu debacle. If you’ve been to business school, you know that all of the empirical studies have shown that value beats growth and momentum by far. Although, you have recently adopted a nihilist tone, e,g., Paul Krugman knows as much about economics as his plumber, etc, so you may have completely abandoned reason for following a squiggly line. I hope this is more a marketing ploy than anything else.
July 9th, 2009 at 7:24 am
@Anthony: It’s not nihilism, it’s realism. Academic studies mean little in the real world (value, growth, momentum — this kind of division is nonsense to start). Krugman’s knowledge about economics will never help you make a dime, but learning how to follow a squiggly line might.
July 10th, 2009 at 1:23 am
How about a compromise? How does Krugman show you how to manage your risk? How does following a squiggly line show you how to manage your risk? Maybe Krugman assuming he is a super genius and can “predict” the future 51% of the time instead of 49%, but what good is it if he doesnt know how to manage risk.
Also how can any super genius know everything (other than George Soros, Marc Faber, and Jim Rogers)? I KNEW WAMU was going under and had puts and made money on said puts but I also “KNEW” AIG was a great long and rode it down to $2.
What would have saved me? Managing my risk…….
July 13th, 2009 at 10:16 pm
definitely, risk management is the most important in trading. UNG just made a new low, where’s the reversal?
July 14th, 2009 at 6:59 am
@Yi: Yes, I saw that it hit 11.91. Managing greed and fear is everything (trail the stop).
July 20th, 2009 at 10:40 pm
If risk management is THE most important thang…..then theoretically one would be in profit if, at market open every trading day, one just bet equal amounts, long and short, on the same stock/index/etf…..with equally tight stops on each….and maybe the proviso that the remaining stop trailed.
Money mgt would eventually see running wins out perform stopped losses……..
Obviously I haven’t traded a lot….otherwise I’d realize this doesn’t work. :)
July 21st, 2009 at 12:33 am
This is what Van Tharp proposes. He doesn’t say go long and short the same stock–the market does go up more often than not–but go long randomly chosen stocks, and with the right stops, you’ll eventually make money.
July 21st, 2009 at 3:02 am
@Bruce: I guess you’d run the risk of quickly losing money on both sides as price chopped around — it’s a nice fantasy though, isn’t it? :)
I think there is something to be said (as @bjk suggests) for the idea that entering randomly chosen stocks in random ways may not be disastrous as long as the risk mgmt is good (i.e., not random).