Trader's Thread 01 (May 08 - Dec 08)

[winston]

The Trouble with Calling a Bottom -- by Bill Kraft

Recently, I've heard a lot of chatter from various pundits about whether they are "calling a bottom" or not. Not surprisingly, some are saying we are at or near the bottom while others proclaim that we still have a ways to go. Who's right? Who knows? I believe the answer, as always, is: "No one knows." It is the same problem as with all prediction; none of us knows tomorrow's news.

Trying to pick a bottom can be a dangerous practice in trading. Naturally, we don't want to miss the turn and we know that there are going to be a whole lot of great opportunities when the markets eventually turn back up. If we decide that the market is at bottom and it is time to buy stocks, we could be wrong. If we do make that decision and begin to enter bullish positions, we would be well off to have a pre-determined exit just in case our belief was mistaken.

I also suggest entering positions that are only a fraction of the size we ultimately intend to have. Gradually test the waters rather than diving in head first when we can't see the bottom. It is OK to miss part of a move. In general, entering once a trend is established can enable us to take a piece out of the middle. I've heard it said that we only catch one perfect top and one perfect bottom in a lifetime of trading. Whether that's exactly true or not, I'm sure you get the point.

When we are trading, we need to remember that we are at the right side of the chart. No matter what we predict, we could be wrong. Does that mean we shouldn't trade? For some, definitely. For those who really want success, they need to apply discipline in setting exits, in assessing reward to risk potential, and in managing money.

Personally, I think we have not yet hit bottom and even if we have or when we do there will be a retest after a bounce. That is what I think, but I can tell you unequivocally that what I think or what you think has no bearing on what the markets will do or on when they will do it. That is why we need to understand the need for discipline and create a trading plan that incorporates the elements I discuss in these articles and in "Trade Your Way to Wealth".

[blid2def]

Fairly long article, but interesting reading.

Deutsche Bank Sold Massive Amounts of Phantom Stock (?)
http://www.deepcapture.com/deutsche-ban ... tom-stock/

[iam802]

wah like that also can.

just can't find it.....pretty lame excuse.

Deutsche got balls. Regulators prove once again that they are pretty useless in their fines.

[blid2def]

Of course, this kind of thing, he say, she say, they say, we say - dunno who is right or wrong. We just follow gong gong and read like mystery novels. The game is like a dirty stinking drain so we just have to learn how to swim in the sewers.

[kennynah]

oh i c.... the "phantom" stock is really describing DB Securities having sold naked short positions (without any matching borrowed scripts) for 22 months... no problem lah.... fine maybe largest in SEC history...DB Securities gains from those naked shorts...far far exceed those fines...and so....that's fine...

[blid2def]

Correction - fine is largest in NYSE history. Dunno how it works... like when SEC steps in to take charge, and when it's left to the exchanges.

[kennynah]

dunno how it works??? write a piece of paper...saying...

you have been fined $1gazillion ... pay up or go to jail...do not pass "go"

[millionairemind]

Have Investors Reached the Point of Maximum Pessimism?
by: Greg Feirman October 17, 2008

The time of maximum pessimism is the best time to buy.
- Legendary Investor John Templeton

On Wednesday, Merrill Lynch (MER) released its monthly survey of fund managers for October. The survey covered 172 fund managers with $531 billion under management. Merrill called the survey “one of the most pessimistic” ever.

Here are some highlights:

The number of managers believing the global economy is in recession jumped to 69% - from 44% in September.
Sixty percent of managers believe the global economy will weaken over the next 12 months - up from 37% in September.
The number of managers overweight cash increased to 49% - up from 36% in September.
Forty-three percent of managers think global equity markets are undervalued - up from 15% in September. The October number is a 10 year high.
According to Merrill Lynch, three factors are coming together that tend to be associated with market rallies: low risk appetite, high cash positions and a belief that stocks are undervalued (“Is Pessimism Good News?” (subscription required), Brett Arends, The Wall Street Journal Online, October 15).

Along the same lines, on Tuesday, The Wall Street Journal reported that three high profile hedge fund managers (Steve Cohen, Israel Englander, John Paulson) have moved a lot of money into cash: “‘Smart Money’ Stays on the Sides: Hedge Fund Chiefs Like Cohen, Paulson, Move to Cash to Ride Out Storm” (subscription required). According to the article, Cohen sold about half his stock holdings last week, closing out the positions of 50 managers who work for him.

If ever there was a moment of maximum pessimism in the stock market, this is it.

[iam802]

Not yet maximum pessimism.

Cos, the article just said.. "three high profile hedge fund managers have moved a lot of money into cash"

So, at least for me... I will not be hero yet.

[blid2def]

Well, this is what I hope will happen, regardless of which camp you're in:

- If this turns out to be the bottom, the people who bought into the "this is the last chance to buy!" spin don't laugh at the more conservative/cautious folks who choose to stay on the sidelines;

- And if it doesn't, those skeptics who're proven right don't laugh at the believers watching their stocks sink another 50%.

'Cos nobody likes a smart arse.