Cramer mentioned the Canadian Energy Trusts this p.m. His logic was similar to mine. ERF, the trust that I bought in my retirement account @ an average cost of $42.45 (I flipped some in my taxable account), was up immediately to $43, and it closed at $41.17. So I'm certain I'll be in the black again, but I must admit that I cringed when it was trading at $38. I had enough exposure in my portfolio that I did not buy more at this price. So, we'll see how this works out.
MIND had a nice increase today, closing up 4.4%. It's close to a small breakout. I have a very small position of 500 shares. I may add more if there's a decent breakout.
IVGN is still green but barely.
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11.16.06 Update...certitude and the market are not compatible bedfellows. I think that if oil had not gone down $2 my comments would have stuck. But I'm egalitarian, and I would rather have cheaper oil than money to stave off starvation cum retirement.
4 comments:
'My prediction was accurate: but "X" occurred' is one of the standard types of heuristic-bias noted within the field of "behavioral finance."
We believe our correct forecasts are due to our ability and our failures are do to some extraneous off model event.
Another common predictive failure is "gamblers fallacy" which is a phenomena whereby people inappropriately predict reversal: it is essentially regression to the mean gone over-board. Hersh Shefrin has a good discussion of a number of predictive failures in his "Beyond Greed and Fear."
Your wise move was not to put more money in as the pps went down regardless of its newly inexpensive status.
The people on the other side of your trade will generally have a lot more information then you will. The only clear advantage the small investor has over most institutional investors is that they can afford to take a longer term investment approach. The small investor does not have to worry that their customers will pull all of their money after a few quarters of below market performance. So the small investor does not need to chase performance (though they often do).
This time frame advantage is the primary reason that "value" investing is the only strategy that seems to consistently work over time without having its "edge" arbitraged away. Value investing returns are too choppy for the institutions/hedge funds to easily use. Most forms of value investing also do a very good job of limiting the problematic investment behaviors sited in behavioral finance.
Russell20: great post!
Thank you for clarifying for a lot of us (well, clarifying for me: maybe I should speak for just myself) what makes so-called value investing so powerful over time.
Russell120--Thanks for your note. Bill Cara espouses buying when the RSI is low. I tend to think that is a good strategy. IN general I have done my best buying good stocks currently "not feeling the love." I have Thaler's Advances in Behavioral Science. I find it fascinating.
I agree that our time frame gives us an advantage. We can also be nimbler in and out if the position moves.
As Russell120 and Richard note...never pay retail is as apt for investing as it is for the accouterments that adorn our day to day lives (auto's, homes, clothes, etc).
I do have a small thesis that the smart money is not so much smarter than I. Gosh I blush at such a statement. But let's take a moment to look at it. Upgrades. Whooosh. Downgrades anti-whooosh. If this is so-called smart money, why isn't the car already parked in the space? It feels like to me (and my crystal ball is oval and cracked these days it seems), that we have money moving in and out of sectors! I think that the key to performance in this market is to be in the sector du juour (sp?). Darn I wished I had taken French!
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