Monday, July 14, 2008

PM Post

Michelangelo fresco ceiling atmosphere
Photographic Print
by Christian Simonian

This is a nice Armenian name.

My UYG was a nasty acquisition. Such a bounce from such skittish shorts. I bought some SRS to hedge.

The insurance companies, where I assure you that HERE is where you read about them first (I despise making prideful remarks, but I'll go to my grave being proud of that call), are getting whacked. How it took so long is a constant reminder of my being too anticipatory--a deadly sin in investing I've determined. Nevertheless, I waved the flag--and that is worth your lingering here a bit, I think.

HERO. I like this chart. I had JUL 30 calls that I let go (expecting an implosion in the OIH) with a modest gain. I then bought common and my stop loss was hit on the last decline. There really needs to be a decisive break above the dotted line. You might consider putting it on a watch list. Today's jigginess came from Bush lifting offshore drilling bans (unilaterally I might add, but I'm not going there).

I think that I do a pretty decent job of finding opportunities, but I've concluded that I don't manage my positions terribly well largely due to my letting my biases color price/volume movement. I take a small gain when I could get a very large gain. Some times I cleave losers to my breast as if I could somehow resuscitate them! I still have my DVR Oct $15 calls. Ask me how that is goin'!

I have a small, recent position in WX. I note that Warburg Pincus has disclosed today a position. They also recruited from PFE a former co-head of joint ventures. I find these two events auspicious. WX is a Chinese pharmaceutical research company. You can read about them here on FINVIZ. I note that it could easily fall to 15 and change. I'm going to watch tomorrow and see the reaction to the W-P news.

This market is reminding me that conventional buy and hold, dividend and value-play wisdom can get you murdered. Dividend plays--most particularly with the banks--have been murderous. A 4% dividend doesn't help you much when a stock is in a free fall. I've always voiced skepticism about rigid buy and hold methodology. We've had entire industries decimated in this environment. As we've watched our stalwarts fall, it is a reminder to me that you have to account for the macro environment's effects on good companies. Good companies in bad sectors get mowed down. Cisco and Oracle are examples of terrific companies that NEVER came close to kissing their old highs.

If you are in a sector that is out of favor--such as homebuilding and financials--dollar cost averaging down is a ticket to the poorhouse. There's no question that these will come back, but selling (or reducing exposure to) sectors as they peak and buying (or increasing exposure to) sectors as they bottom (not while they do the Acalpulco cliff dive) sure seems to be the smartest strategy from my vantage point.

What is difficult in following such counsel, and it is not lost on me, is that there is a miasma at the top and a miasma at the bottom for most but the most clear-sighted. I note that Capital Research and Management is the largest shareholder for FNM and FRE. Legg Mason has a big position too. I'm sure that is a huge headache for a money manager. I can imagine no more stressful a job than to be a long only manager in this environment.

When I think about some of the "stupid" stuff that I do, I remind myself, that I'm far ahead of the indices, and the 'smart' money is not. I don't mean for that to sound like hubris in the least. I try to act and write in a hubris-free zone. Nevertheless, sometimes we lose sight of the incredible alacrity that we enjoy as small investors, as we are frequently reminded that we are 'dumb' money.

3 comments:

baronadv said...

im in the same place. down a little bit. blowing away the averages but my wife reminds me that you can't eat relative returns. whats the worst probable outcome...that we're halfway thru this mess? that we dribble down for another couple quarters? the weird thing is i really enjoy the ride. the companionship. the advice. the complaining. its all good.

Leisa said...

Hello Baron! Worst possible outcome? I think that you perhaps list one of the sunnier ones!

Anonymous said...

The potential is there for a wipeout, no doubt about it. One of the worst environments that I've ever seen and that's saying a bit. I am holding PLENTY of cash here and mostly have absolute return strategies in place. My true longs are suffering. Good luck.

MarkM