Sunday, July 27, 2008

Ando Hiroshige

Another class of retrospective speculators base their operations on seasons, or even corresponding weeks and months, forming their opinions on insufficient research, or on nothing at all. If there were in truth any certain period of the year or month from which movements would occur, the whole world would know it, and such knowledge would reverse expectations by the rotten technical conditions it. (p 88)

Thomas Gibson
Pitfalls of Speculation

In Summer of 2006, I sent a note (after much teeth gnashing) to all of my friends to urge them to talk to their financial advisor regarding strategies that they could employ to protect their portfolio in the event of a bear market. I had lunch with a friend recently, my friend indicated that most of his stuff was down 30-40%. My friend had called Fidelity and the comment was you are well diversified we would not suggest your changing anything.

I still conclude that the average investor is poorly served by the investment community. We are encouraged to keep our money invested while the smarter money is selling (or short selling). There's so much moaning about taxes and its purported redistribution of wealth, but no one talks about the redistribution of wealth that happens periodically in the market downturns.

Yesterday I downloaded all of the tickers from Fidelity and put them in Stockcharts. I then reviewed the charts. Many of the funds have more than one iteration (I had about 400). Too many, but I did look at all of them. Subsequently, I then just pulled all the sectors, some of the country funds, leaving the other stuff (bonds funds etc) alone. There are three charts that are above their 30 week moving average: FBIOX (Biotechnology), FBSOX (IT Services, barely and on a bounce), FSMEX (Medical Equipment)

To be fair, many of these funds experienced an extraordinary rise. And many of these funds have experienced an extraordinary loss; you can guess the sectors: banking, real estate, homebuilding/construction. And while market timing is anyone's guess, a periodic review and reallocation of funds among sectors/asset classes makes sense in order to lock in gains of over performing sectors. My lament comes from this: most average investors (folks with qualified money through an employer plan) are not well equipped to do this analysis. Worse, the financial services industry on the whole does not proactively advise in this regard.

The quote: I pulled this quote because it reminded me that if everyone is looking for the same thing, then the opposite is likely to happen. And while I know there is a preponderance of evidential matter that speaks to monthly rhythms, seasonal trends, presidential cycles etc....I also understand that the market is likely to do the opposite with just enough regularity to trip up a person or two. So the oft-called advice of buy the dips and sell the rips on this bear market is going to work until it doesn't.

I listened a bit to Financial Sense Online. I enjoy listening to the technicals. After listening a bit and reading Mauldin's latest missive, I think that I should turn my attention to subsistence living.

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