Market Miasma

Today I will do a dog transport. It's my first with this group since my injury, though I did do a single dog rescue for Chase, the English Setter. I'll drive from Richmond to Springfield. I'm looking forward to seeing my fellow volunteers and the passengers!

I get Colin Twigg's newsletter. I find it worthwhile. It is free, and you may want to take a look for yourself, which you can do HERE. In this week's missive he warns of a bull trap. As much as I yearn for clarity in the stock market, I've concluded that looking for clarity it is the equivalent of looking for a unicorn. Clarity in the market is mythical.

When you think about it, though, clarity in anything that we do in life doesn't really exist except for how we define it. We define it through our "stories"--the story of ourselves; our relationships; our purpose. As we change the story, we change the reality. Isn't that how the market works?

We build stories around investment/trading methodologies: follow momentum, invest for the long term; diversification; value investing; contrarian investing; investing by the stars; investing with the stars. And once we get the story right around the methodology we choose to follow, then we build stories around investment themes (global infrastructure, decoupling, currency moves etc). I think we spend more time finding the touchpoints that prove our story right rather than focusing on the touchpoints that call our story into question.

The Kirk report posted Gerald Loeb's trading tactics. You can find that post HERE. I think it is worth your taking a look. There were a few points that really resonated with me that I wanted to share.

You must trade with the actions of the market and not simply by how you might think the market should trade

My thesis that oil/basic materials would fall once the specter of recession was seen by all. Nope. Nope. Nope.
The best traders are usually psychologists. The worst are usually accountants

As an accountant by training, I do find that trying to ascribe logic and analysis to outcomes that one observes is frustrating and oft times unfruitful. I do understand market psychology better now, so I'm less frustrated and certainly less surprised. I consider that progress.

The stock market is more an art than a science and far more complex than most people understand

Roger that. Unfortunately, I think that many folks want to make it seem simple. In fact, it felt like to me that it should be simple and straightforward. Nope.

The best stocks will always seem overpriced to the majority of investors

If I can slay this dragon, I will have come a long way. Many of the market leaders I do not buy because they seem to expensive to me.

What everyone else knows is not worth knowing

I agree with this. And when I think of the opportunities that I've been able to exploit it is because I knew something that others didn't know. Two areas--bond insurers/mortgage lenders and HMO stocks--are where I expected a decline for good reasons. Unfortunately, we are told that there is no way that we could 'know' something that the market doesn't know. I don't buy that anymore.

But it does take the market time to figure it out--so it is best to take what you know and tuck it in your pocket, wet your finger periodically and stick it up to see which way the wind is blowing. When the wind shifts, and you can see that a few are starting to come to your realization (and watching the chart is the only way to do that in my mind), then make your move. If you are early, you might as well be wrong.