Somewhat Surprising Day

A year ago, I would have called today a Stupefying day. As I watch the market and seek to make sense of its reactions to this and that, my choice of adjectives has tempered. I think that is my realization that market dynamics are not necessarily fathomable much less logical. I'm not in the camp that markets are random despite research that says otherwise.

Despite the market's antics, whether we agree or disagree, there are plenty of folks who want to rationalize the move whether up or down. We see that everyday, and I grow weary of the stories. I've learned that when the stories grow tired and begin to sound cliches it's time to put your wallet or purse on lock down.

I'm not really sure what to make of this market. Alan Farley (a trader) was writing on Real Money and warning folks of the serial bottom callers. My particular feeling (yeah, my story for the market) is that it was down for so long it had to get up. The market (meaning us) is opportunistic. What could be more opportunistic than goosing the gas just before some empiricism (earnings/forecasts) rains a cold shower on the parade goers? I'm parading a bit, but I've got my umbrella in case it rains. I'm with Cat in the distrust camp. I included Alan's "Hard Right Edge" website in the "New Stuff" and in the info mosaic. He has some great information there. I've not been there in a while, so referencing his column was a good reminder.

NG wonders, "Does anyone know if it is possible to make money without making predictions?" I asked specifically of him that question---"How does one make any decision without making a judgment about future direction?" Whether it is rhetorical or not, I've no answer. Nevertheless if there is an answer to that seeming riddle of a question, then it would be terrific to put it out on the table to discuss.

Regarding technicians being right 100% of the time. I don' know of anyone who claims that, so I do not see that as a transgression on the part of technicians that needs to the thwumped in any way. I do believe that equilibrium is always reached--if but for a moment--and equilibrium lies some place between over optimism and excessive pessimism. Even when earnings get reported, the fact means little, but rather how it slaps up against the wall of expectation. But over the long term, there is some helix of stock price around the core of fact/fundamentals. I do believe that technicals help a bit in divination, but it is like probability tables. One goes through much effort and aggravation to come up with probabilities of x, y, z happening when in truth, only one can happen and when it happens it is assigned the probability of 100%.

I'm fond of saying that one cannot judge past information using current information. In fact, anytime any of us engage in a coulda, woulda, shoulda, we are doing that. Generally we are doing that when we (1) left a big gain on the table; (2) failed to enter a transaction that would yield a tidy gain (RIMM, MOS before earnings); or (3) overstayed our welcome. The time frame for our considering transactions is cloaked in uncertainty regarding the ultimate outcome. We really do not know what the outcome will be. In fact, today with the magnitude of the loss in jobs, who really expected the market to act the way it did?

Once we have an outcome we are now bathed in the light of knowledge and fact. We too easily slap our forehead like an actor in a V-8 commercial and say "I could have bought RIMM ahead of earnings". Judging the genius or foolhardiness of a decision that you made (to make or forego an investment) in a state of ignorance (ignorant because you are not clairvoyant) can be dangerous, IMV. What merit does judging from a perspective of full knowledge have? I think that is why having disciplines that you follow without thinking about them is helpful:

• "I will sell if I lose 10%;" "I will sell one half if I double my money;"
• "I will only buy if a stock is not over extended;"
  
• "I will never short a stock that is above it's 50dma.
  
• "I will never margin my account to the max.

These lists go on and on, and you've seen many of the same ones that I have. NEvertheless, whatever the rules, when you have these steadfast rules AND (more importantly) when you adhere to them, you absolve yourself of ever having to look back (and saying you are sorry!). You divorce yourself from the emotional aspect which can be so psychologically damaging. The relationship with that stock either met or didn't meet your needs with the information that you had at the time and you moved on.

Reviewing an event after the fact is, well, fact. Fact is an apple. Uncertainty is a an orange. You know what they say about apples and oranges. Plus, you can ascribe any credible story to any apple outcome, and you only have to chose one story. But when you are in the orange zone of uncertainty, you have a veritable string of outcomes--some of which you may ascribe a greater probability over others. But you've got a book of fairy tales--and some of these stories have really great endings where you will live bathed in riches to a ripe old age. Unfortunately, some have endings that just involve your trying to cross a bridge becoming a snack for a troll. If RIMM had slowing sales and fell 20%, someone would say, "Well, RIMM's client base is the financial community and they are losing jobs, etc, or China is slowing." So while politicians say "A chicken in every pot," Wall Streeters say, "There's a story for every outcome".

So it is useless. Okay...now I'm giving myself pause in writing "useless"; therefore, I 'm going to qualify it. If you made a decision absent a rule, then it is perfectly okay your using the apple zone to judge the orange zone and make some judgment about whether or not a rule would have supported your decision making. I don't write any of that to sound emphatic, and perhaps this is just Leisa-land logic, but this is how I make sense of it. If you know that trolls live under bridges, but do not like the daylight, then you'd have a rule to ensure that you don't walk across a bridge from work to home during the evening hours without taking on great risk.

An aside...A friend an former colleague that I've not seen in a while just called me. He is in NC and saw the redbuds. He knows that I love redbuds, and he did an outreach to let me know he thought of me. That was very considerate, and it gave a lift to my spirits. It's a good reminder to you that if you are thinking of someone that you've not made outreach to, Spring is a time for renewal, so think about how you can renew some connections in life. Though I don't watch Oprah, I think that sounds Oprahesque. I think of my friend when someone says "shoulder seasons". He was commenting on how nice Virginia's shoulder seasons were. Until he said that (he is from Maine), I had never heard it uttered. And...I heard in on CNBC yesterday, and thought of him. So it is a happy, albeit strange, coincidence to hear his voice.

Tomorrow I'm going to do an English Setter rescue. He's a bad, bad boy (but he is so beautiful, and we women know that the two go hand in hand). He's on foster home number 3. Maybe 4. He chases cats (bad, but not unexpected). He doesn't like small children (that earns the double bad, as he growled and lunged at a 3 year old). Setters are so docile, it is almost hard to imagine. Couple is divorcing and no one can keep him. I stated that I could not really walk the dog properly on the potty break, but I can drive.

I've been a good patient, and I've been walking with full weight on my foot. I can only do it in the mornings, but NOT first thing in the morning (foot is numb, calf muscle is very sore). I'll lean on a crutch the balance of the evening as my foot is quite sore now. My ankle of course has no strength, and any bump in the terrain is not easily navigated. By the time I go to bed, my poor ankle looks like it belongs to a pachyderm. At least for an hour or so in the morning it looks like it actually belongs on my body!

I hope that you have a good evening. I'll update my sector report and post if for you over the weekend. I'll listen to Gary K this evening or in the morning along with FSO and give some summary comments.

Have a terrific evening.