Weekly Sector Update: 01/29/10

I've made a few changes to the charts. I'm going to continue to use the 164 sectors/sub sectors on the weekly sort; however, I'm changing the chart presentation. I'm using the broad sectors, and I'm including daily, weekly and monthly charts.

Here's the best/worst sectors relative to the broad market:


You can find the full summary of the sectors and the chart book of broad sectors in daily, weekly and monthly format here.

All data courtesy of Stockcharts.com. Compilation courtesy of me.

Optimism

I see much hand wringing in venues regarding the future of "insert your worry here". I find such talk by so-called realists dismaying. If I have rose-colored glasses, the lenses are badly scratched, and they sit cockeyed from being banged up. Rather, I like to think that my experience, and the experience of our country's history, points to the great things that one/many can do when there is commitment to a positive outcome.

Just as the line between conviction/bias is blurry, so too is the line between critiquing/carping. I'm still having trouble with the line of demarcation for conviction/bias. However, the line between critiquing and carping has a very sharp, thin line--and that line is simply the line of action v. inaction.

The sport of second guessing the actions of leaders and engaging in armchair econometrics has risen to a national past time. To be sure, there is plenty of fodder to feed both activities. But my counterpoint is simply this to those who engage: what are you doing (besides griping) to make a difference? There are plenty of folks in the media that are very capable of inciting the emotions of those that want the heat of their discontentment fanned. Frankly, those folks are no better than the people that those they target in their hostile laments.

All of this would be amusing were it not so damaging. It creates a division of us v. them. The HBO series, John Adams, was a very compelling reminder of the sacrifice a citizenry must make to effect meaningful change. When our commitment to things outweighs our commitment to values we become lopsided, unbalanced. Our much-lauded forefathers were still a collection of flawed people.

Human DNA has not changed, though we would like to think so. So it is both unwise and inaccurate, to believe that our leaders from before were vastly superior in all respects to our current leadership. They were not. But they did share a commitment to sacrifice everything--safety, freedom, wealth, their lives and the lives of their families--to effect change that they believed in.

It's fine to be angry and outraged about 'stuff'. Anger and outrage are very compelling emotions---they provide fuel for change. Our nation's birth is the best example of what properly channeled anger and outrage can accomplish. Are you outraged by handouts? Go volunteer at one of your health and human services agencies. Might as well get good look at the freeloaders and 'system-workers' for yourself. The faces that you see and the stories that you hear might give you an education. Are you outraged by your politicians? Run for office--better yet, go lend your energy to the party of your choice.

"Stuff" doesn't get done by armchair anybodies. Armchair anybodies are benign lumps that make a lot of noise--it is a benign cacophony. Whatever is ahead of us, the leaders of (wo)men will not be those that point out the faults of others, but rather those who point to the courage and goodness within us and inspire us to be a change agent rather than a bitter soul content to carp from the sidelines.

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Weekly Sector Update: 01/22/10

This week's weekly sector update is wild and wooly! Here's a link to the PDF with the fully summary of sectors sorted relative to their performance against the broad market index. Here's a snapshot of the Best/Worst:

Weekly Sector Update

Here's this week's Weekly Sector Update. It's interesting to see the flip of some of the previous sector toppers (Aluminum/Steel) as the laggards.

Here's a summary of the Best and Worst:

(Click to make larger)

And I have prepared the full listing of sectors sorted by performance against the broad market index. You can find that here.

All data is courtesy of Stockcharts.com and the compilation courtesy of me.

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Weekly Sector Update

Here is a snapshot of the sector performance for the best/worst performers over the past week.

I've included the full chart in addition to the weekly sector charts in a PDF which you can find here.


Data courtesy of StockCharts. Presentation courtesy of me.

2009 Reflections

I've just finished reading the ever perspicacious Jeff Saut's "Lessons Learned" of January 4. You can find it here. As I close the door on 2009, I have these reflections to share:

Reflection 1 | Learn how to embrace and thrive in uncertainty: While there are a multitude of people espousing multitudinous methods that are guaranteed to make you rich, understand in your bones that investing involves risk. Keep in mind that the capital of many ends up in the pockets of a few--the market is not an egalitarian arena designed to enrich all participants. Unfortunately, it is often presented that way. Why? Because you have capital that can be extracted into another's pocket.

Reflection 2 | Learn how to lose: Much like any other endeavor that is important (your health, your relationships, your reputation) you can undo quite a bit of good with a few stupid moves. Ultimately, you win by learning how to lose. Lose small; win big. The obverse is much too easy to embrace. Unfortunately you don't learn how to lose in other venues; you learn how to win. You will fail in positions you take. Learn always how to fail better.

Reflection 3 | Conviction v. Bias: At what price?: There's a line between conviction and bias--it is drawn with the time and dollars pencil. Make sure that you know how much you want to pay for that pencil to draw the line between the two.

Reflection 4 | Commiseration v. Collaboration: The blogosphere offers unlimited availability of opinions. You'll have no trouble finding opinions uttered by very smart and erudite folks that perfectly align with yours. Best to seek out people that disagree with you and try to understand their arguments so that you can find potential holes in your thinking. I've never seen any business venue where commiseration led to good outcomes. Commiseration and collaboration are not the same. Commiserate less; collaborate more.

Reflection 5 | Your mileage may vary: I'm always amused by the examples of the great investors (Buffet, Graham, Lynch) and the idea that all investors can achieve such results. That is simply not true, for the plain fact the market place necessarily has to have two opposing opinions for a transaction to take place (a buyer and a seller). If it were so easy to attain such status and cultivate prescience regarding investment decisions, there would never be a buyer when you want to sell or a seller when you want to buy. Plus, there is so much more at play than can ever be codified in a way to make investing a "color by number and you'll get a masterpiece" type of endeavor. Not every golfer will be a Jack Nicklaus (yeah, already the name avoidance!). Again, you don't have to be the best to beat the market, just a bit better than the rest. You CAN do that.

Reflection 6 | Own your decisions and be a sport about it: It's your money; your decision. Railing about how stupid other people are who are on the other side of a transaction and making money is whining. Griping about the "They" who are propping, dropping or holding the market up, down or sideways is detrimental to your mindset of owning your decisions. Fairness in many of life's venues (go visit a hospital or an unemployment center) is absent. If you are expecting it in the market, you need to recalibrate your expectations. Whining is not a strategy that will yield good results.

On Writing

One of my resolutions this year is to answer the question "What do you do?" with "I'm a business consultant, and I'm a writer."

"I'm a writer."

Uttering these words is difficult--and they are never proffered as a perfectly sincere and true answer to the question of "what do you do?". Oh, I've a long list of labels that I'm perfectly happy in owning up to (some flattering, some not), but somehow "writer" is not a label that I've owned. Certainly my reluctance has nothing to do with shame in writing. Rather as an appreciative reader of many writers' offerings, I've conferred a sacredness to that art. Simply put, I've never felt that I had attained whatever measure one attains to call themselves a writer.

So if "I think, therefore I am" works; then "I write, therefore I am a writer" must work. This year, I'm going to give voice to being a writer.

Right Efforts | Theory of Relativity | The Wisdom of 18 Year Olds

There are times in your life where there are a confluence of 'things' that solidify (for good or naught) certain concepts. Over this past week, I've had three such points of contact that have served to enhance my perspective on market matters.

First, on Christmas morning, I had what I considered a disastrous conversation with my son (18) where he opined: Face it Mom, you were lucky in your career. Since we're friends here and all of that, I can confess to you that I was damned angry. Oh, I had the "effort=outcome" discussion, and he knows quite well the level of "effort" on my part. (I've more to say on this later).

Second, I picked up Beating the Stock Market by McNeel and The Zurich Axioms by Max Gunther. Both had a reminder in them that the market, despite our best efforts, is still a game of chance. And both admonished that price patterns can delude us into thinking that (1) there is order in chaos; (2) history repeats itself; (3) there is a holy grail to any of 'this'.

Best to channel the great ones from time to time. Heraclitus stated (paraphrased): You don't step into the same river twice. That statement was a pleasant absolution of my visceral rejection of attempts by many to take the current market's zigs and wiggles and compare it to x, y, z point in time. The argument among which historical period this is most like chart-wise fails to consider that we've stepped into a different river now.

While we are bombarded with market platitudes that the market discounts the future, there is a failure to state this simple truth: No one (not even the market) knows the future. What we do know is this: The market is an imperfect discounter of what it perceives to be future value. As Father Time marches resolutely forward, the future is revealed. The future has a terrible habit (on which we can rely!) of abrading against the expectations of the many and rewarding the expectations the few. The market's zigs and wiggles, then, are merely the market's recalibration of its expectations of the unknowable as it becomes known COUPLED WITH available liquidity. The size of that gap determines whether we have a zig (big) v. a wiggle (small).

Third is a conversation with an Internet friend/trader on 'stock stuff'. There are two things that are important to say about this exchange.

• While I've spent quite a bit of time reading and writing about my experience with the market, I've spent NO time talking about the vagaries of trading. This person has afforded me the opportunity to have such a conversation, largely because there is not one soul that I know in my off-line life that gives a whit about trading.
  

• This might seem like an odd thing to say, but giving voice to one's thoughts in conversation is a different process than writing. More satisfying because you have the opportunity to be challenged/questioned, and you have the opportunity to do the same. Continuing to cultivate such discussions (real-time) is one of my goals this year.

The product of this pleasant exchange was to think about importance of being able to complete the phrase, "price relative to ____."

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While I would love to believe that "effort=outcome" in all things, that pleasantry is simply not true. Unfortunately, I came to that conclusion as I wrestled with what I believed to be my son's dismissive comment that jarred me to my foundation. While attempting to think about it to acquire my ammunition to lob his way and blast this conclusion, I realized that I merely shot myself in the foot. (I've not shared this with him just yet!). But such thought wrangling is helpful, and it led me to the following conclusions:

• Right effort within the wrong opportunity doesn't yield a commensurate outcome for the effort; and

• Absent right effort, one cannot take advantage of the right opportunity.

Despite those two conclusions, I also note that, you can win without effort and without opportunity--those are life's little lotteries that happen to a few. I'm choosing not to highlight that to my son because I still embrace this little truism: "you make your own luck". The two points above are the embodiment of the off-cited definition of luck: the intersection of preparedness and opportunity. My embrace is not nearly so tight as it has been in the past, because there is also this: despite your best efforts, it is still maybe the 'wrong effort', and success may not come. I'm not trying to get overly philosophical here, and I may have the wrong effort underway to make my point.

"What's the point?" you may be asking while tapping your toe impatiently. The point is simply this

• As investors/speculators we have to make the right effort (developing our skills to find the right opportunities); AND
  
• We need to ensure that we are in the right opportunity.

Which leads finally to, "How do we know that we are in the right opportunity?"

To evaluate the right opportunity, you need to have some anchor points. These anchor points are simply your 'lines in the sand'. Whether you are a technical trader or a fundamental trader or the bastard child of both (as am I), you are making an entry based on a "price relative to ____" (your chosen criteria). Further you are making an exit based on "price relative to ____" being accomplished over some period of time that you are willing to be in THIS opportunity v. the other opportunities available to you. (And it implicitly includes both a dollar and time stop loss!).

Your job, then, is to find your inner physicist and develop your own theory of relativity for each opportunity in your life. If you were to do that, you'd make optimum decisions, and you'll realize the dreams of all economists who have this wrong-headed view that we are purely rational beings.

Whenever you feel that any of this seems impossible just remember this....you don't have to be the best, you merely have to be a bit better than the rest.