Friday, August 10, 2007

Gurus

MarkM writes

L-

Premarket futures say that we will retest the lows today. Not unexpected. "V" bottoms are rarer than "W" ones.

I know you place a lot of trust in Dag's opinion as well but I can't understand for the life of me why continual injections of liquidity are always good for the market as he opines. If he has further insights in his newsletter, could you please share? I am not an Austrian school economist but if there was a magic bullet such as this we would just flood the system ALL THE TIME.
I'm not going to answer the question, for I really don't know the answer. I find the statement about liquidity a bit of a head scratcher. Perhaps the "answer" is time frame: short term we are scratching our heads, but long term, as part of the natural economic cycle, liquidity gets injected.

But the question poses an opportunity to respond in a different vein. I read the opinions of many folks. As a lay investor, it is difficult to parse out the stuff that "matters", because what matters to one person may not matter to another. Though I find it highly instructive, I do not use it. I look at his picks, and his track record is terrific. But if I cannot understand the investment, I will not make it.

Granted, that stance has led me to wonder why I do not just find a system/guru and use it exclusively. I suppose that I'm just a born recalcitrant. More likely, I want to understand "stuff" for myself. I will say that I've gained much more confidence in my ability to synthesize the stuff that I read, and I will point to my posts of March/April as evidence of my having a basis for that confidence. (As I write that, it sounds arrogant, but remember, I speaking of MY confidence in MY stuff--not that anyone else should have that same confidence).

I do believe that I can safely say that I've graduated from the unconscious incompetent to conscious incompetent. I think that I earned my badge by researching and understanding for myself (1) the depth of subprime; (2) the proliferation of hedge funds and their risk profiles and increased the risk of interdependence of financial institutions, to include insurance companies, with hedge funds; (3) the nature of the credit markets and the economy; and (4) the lack of or dissonance in the commentary in the major media outlets v. what is really happening. The latter you've seen very little written about. Trust me on this, when the credit market seizes up so will the economy. The sonorous chant of "global economy, liquidity boom, high employment" will lull you into a stupor that will soon part you and your money if you are not careful.

What I'm pi$$ed about (moderately so), is that because I did not trust my understanding, for no competent person was talking about it OR were playing down the risk, I walked away from several extremely profitable positions that would have well compensated my time. I had put positions in MTG, ALL, HIG, LTR--and I let them all go with a modest gain because of lack of conviction. I've refrained from going back and calculating my gains, but it would have been more than $40K. That may not be much money to you, but it is to me.

9 comments:

Anonymous said...

I'd be thrilled with another $40K in MY portfolio.

Anonymous said...

Unlucky this time. Methinks there will be other times and others in that sector worthy of your attention and application. You did take losses and some say the greater skill is not avoid or at least to minimise these.

Anonymous said...

"You did not take losses and some say the greater skill is to avoid or at least to minimise these"

Anonymous said...

Who or what is "Dag"?

Anonymous said...

I like how it says "Gurus" and then right underneath it begins: "MarkM writes..".

Okay, I can dream can't I? :)

M

Leisa♠ said...

M--Hah! Any guess on what the Dow is going to close at? Here's your chance to earn your Guru stripes.

Anon: Dag=George Dagnino at Peterdag.com. You may click on the link to the right.

jest said...

L-

some more interesting research you may want to look into is the Gramm-Leach-Bliley Act. maybe you already know about it.


apparently, the securitization that allowed the creation of CDOs was banned by the Glass-Steagall Act in 1933.

http://tinyurl.com/2afnc8

in 1999, Glass-Stegall Act was repealed by the passage of the Gramm-Leach-Bliley Act.

think it's a coincidence that a couple years later, securitization suddenly spread throughout the industry at an exponential rate? not just with ibanks, but commercial too.

it's an interesting topic; i've never heard anyone discuss its implications for today's liquidity issues.

Anonymous said...

L-

You have this Guru thingy all WRONG. You don't make clearcut predictions. You say one thing then in another place put a caveat or a qualifier on it. If "A" comes to pass, you point to IT. If "B" comes to pass, you say "But I also told you..." etc. Haven't you seen this over and over? I HAVE. ;)

I think it is great you are going to try to earn your scrape. I think you can do it. I would input that your writing style and reflectiveness does not indicate that you are a daytrader. I would look at 3-6 months kind of position trading. Just a thought.

M

Leisa♠ said...

Jest--I'll take a look at the GLB Act. I'm not very familiar with it.

M--Yes, I'm aware of how the Gurus point to the correct stuff and ignore the stuff that did not work out. Regarding s-t position trading, yes that is normally what I do. But there are some opportunistic trades (such as short squeezes and the attendant deflation of the stock price)that are one hit wonders and require a daytrading mentality.