Stock Market Insanity Let's first define insanity. It is doing the same thing over and over and expecting a different result. And that is what most investors do and they can't understand why they are not able to make money in the stock market.
Its A Bull, Its A Bear, Its Suptertrader! The higher the market goes the more confusing are the "experts". In the September 14 issue of Investor's Business Daily newspaper we find the great prognosticators such as:
Intervention Intervention. Now don't let that big word scare you. The talking heads on TV have been discussing it all week because the major banks of the world are going to "prop up" the Euro.
Is Your Garage Full Of Junk? I have a 2-car garage. There are nice shelves on one side and a good practical workbench with a vice on the other side. Plenty of room for 2 cars yet I have to be careful when I pull in so I won't run over stuff stacked on each side. Sound familiar?
Its A Duck If it walks like a duck, quacks like a duck and looks like a duck it must be a duck.
Its Better Question: How does it get better when it gets worse?
Market Globalization Just 30 years ago the stock market was a shadow of what it is today. There were many fewer shareholders and the daily volume was a fraction of what it is at present. No one thought you would every be able to trade a billion or more shares in one day. Of course that was in the old days when they had tickers and the word digital was something you did with your fingers.
Market Timing Every broker and financial planner will tell you that you cannot time the stock market. I saw John Bogle, the great seer of Vanguard, on CNBC saying it can't be done. Of course, it is easy to understand why he and every other mutual fund manager would say that as they would have a problem managing huge inflows and outflows of money and he was buying and holding during the 18-year bull from 1982 to 2000.
Momentum Momentum - the only easy way I know to make consistent profits in the market and I was a floor trader for 17 years.
Moving Averages Every day on CNBC-TV they show a 200-day moving average line superimposed on the stock price history. It seems they give great credence to this manufactured line as it represents 10 months of price action. What is it? Does it really mean anything?
Market Psychology Today we are inundated with tons of information about the economy, stocks, government agencies and foreign governments. They show us charts and graphs of the increase/decrease in oil production over the last 5 years, the amount of maple syrup produced in Vermont for the past century, the time it takes to bounce a signal off the moon and all kinds of other nonsense that we can live without. The talking heads on the investment programs, both radio and TV, tell us how this is going to affect the price of certain stocks and the market in general. Well, maybe.
Market Timing? The recent criminal fiasco in the mutual fund industry is being used by Wall Street to persuade investors that market timing is a bad thing. The late trading by Janus, Bank America and several other well known mutual funds is falsely being called market timing.
More Window Dressing Two weeks ago I wrote about what the Securities and Exchange Commission was doing to regulate the mutual fund industry to help the small investor, the "poor folks". It really added up to zero.
Mindset In 1960 an engineer working for a watch company in Switzerland discovered that a small crystal would vibrate at a constant rate. He found this was so accurate that it could be used to calibrate time so he took it to company management and said it would make an entirely new kind of watch that had no springs and no gears. They could not imagine who would want such a thing. Swiss watches dominated world commerce. "Why change?", they said. The bosses did not even bother to patent it.
Mousetrap The spring-loaded rat catcher is the ultimate low-tech device invented more than 100 years ago and remains the best demouser in the world. It is so simple anyone can master it and best of all you can keep on using it year in and year out. It always works.
Investment Research - The Dalbar Study Very few people, even professionals, have heard of the Dalbar Study that originated in 1995. Its purpose is to determine the profitability of trading for the small investor of mutual funds. Their results are even worse than I thought.
Direction It is difficult to make money in a bull market, but what do you do when you are in a bear market? In what direction should you go not only to make money but to protect what you have from loss?
Investment Discipline One of the great "secrets" of successful people is discipline and it doesn't make any difference whether it is manufacturing, processing, servicing or investing in the stock market.
Dispelling Illusions of the Stock Market How can you dispel an illusion unless you look directly at it? The magician distracts the eye with one hand while he does his manipulation with the other. You are looking in the wrong place and not seeing what is actually happening.
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