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Daily State of the Markets Good Morning. To be sure, the stock market can be infuriating at times. Just when you think you’ve got the game figured out, it can change completely. For example, right about the time you may have identified the best ways to deal with last summer/fall’s insane volatility (shorter-term trading, covered call writing, long-short pair trading, a healthy dose of bonds, etc) the volatility goes away entirely and a one-way, joyride to the upside is ushered in. And since everybody on the planet is a trader these days, you then do what everybody else is doing: you wait for a pullback, which, of course, doesn’t arrive. You tell yourself not to be “dumb.” You remind yourself that the really smart guys say there will be a pullback, that the move can’t last, and that the bad old days will soon return. They go on to tell you the names of the companies they are shorting, just to make the point. And so you sit and do nothing. All the while though the stock market is movin’ on up and now sits at multi-year highs, which, of course, makes you feel even dumber. Then frustration sets in and you curse the day you ever started trying to trade your own account. “Why didn’t I just let those smart guys run my money for me,” you mumble. If any of this sounds familiar, I’d like to let you in on a little secret. You see, Ms. Market doesn’t discriminate against those “smart” guys and gals with degrees from Harvard, Yale, or Princeton. There seems to be a perception amongst the public that the really smart guys on Wall Street always get it right in the market and that all those fast-money moves they yammer on about for the cameras are profitable. You may even feel that the game is rigged against the individual investor. But here’s a little known fact – being smart doesn’t necessarily make you money in the stock market. Having a degree in applied mathematics and/or working at a Wall Street firm doesn’t mean you are going to be successful in the market. And based on the numbers this year, an awful lot of those really smart guys and gals are getting it wrong again so far this year. Don’t forget, as a whole, hedge funds lost money last year – a lot of money (2011 was the third worst year on record for the hedgies). And while managers swore that they had found religion at the end of last year, an awful lot of those smart guys and their fancy algorithms are once again behind the curve. So, if you find yourself lagging the S&P this year, don’t fret because you are absolutely, positively not alone. According to Hedge Fund Research, the smartest guys on the street – again, as a whole – are not doing so well this year. The firm’s Global Hedge Fund Index, which is “designed to be representative of the overall composition of the hedge fund universe,” is up +3.51% for the year as of Wednesday’s close. And those of you keeping score at home can attest that +3.51% is a far cry from the S&P’s gain of +11% on that day. So what’s the point to this morning’s meandering missive, you ask? In short, this game is about a whole lot more than being smart. I see guys on T.V. who have graduated from the best schools and have written books pounding the table about this or that. And there is little doubt that these guys sound very, very smart. Thus, the assumption by all the viewers is that they are killing it in the market. Which is exactly what they want you to believe. However, the financial community isn’t that large and occasionally I take it upon myself to check up on some of these brainiacs. The bottom line here is that the vast majority of the guys that are so sure of themselves in front of the camera aren’t getting it done in their portfolios. I could name names here, but I won’t. Trust me when I say that I’ve done my homework here. The bottom line is that playing the stock market game successfully requires more than smarts. In my experience, the game requires investors to first know themselves and to develop disciplines, systems, and/or rules that they can live with day in and day out. For example, I know of many management methods that can potentially perform better than the systems I employ. However, I also know that I can’t live with them on a daily basis. So, if you happen to find something that works for you, stick with it. Don’t look over the fence at what appears to be greener grass in your neighbor’s yard. As they say at Nike, just do it. And oh by the way, if you happen to be lucky enough to find someone or something that works well for you, say a quiet thank you to the universe every once in a while and then stop listening to every “smart” guy or gal on T.V. Because, again, this game is about a lot more than being smart. Turning to this morning… It is a fairly quiet options expiration Friday so far with European bourses up a little and futures pointing to a modest rise at the open. However, bond yields are continuing their recent rise, which is sure to catch the attention of traders today. On the Economic front… The Consumer Price Index for February was up +0.4%, which was in line with the consensus estimates for an increase of +0.4%. When you strip out food and energy, the so-called Core CPI also came in with a gain of +0.1%, which was below the expectations for an increase of +0.2% and in line with January’s level of +0.2% Finally, we will get the Industrial Production and Capacity Utilization at 9:15 am eastern and UofM’s Consumer Sentiment Index at 9:55 am eastern. Thought for the day… Best of luck on this Friday and be sure to enjoy the weekend! Pre-Game Indicators Here are the Pre-Market indicators we review each morning before the opening bell…
Positions in stocks mentioned: None For more of Mr. Moenning’s thoughts and research, visit StateoftheMarkets.com The opinions and forecasts expressed herein are those of Mr. David Moenning and may not actually come to pass. Mr. Moenning’s opinions and viewpoints regarding the future of the markets should not be construed as recommendations. The analysis and information in this report and on our website is for informational purposes only. No part of the material presented in this report or on our websites is intended as an investment recommendation or investment advice. Neither the information nor any opinion expressed nor any Portfolio constitutes a solicitation to purchase or sell securities or any investment program. The opinions and forecasts expressed are those of the editors of StateoftheMarkets.com and may not actually come to pass. The opinions and viewpoints regarding the future of the markets should not be construed as recommendations of any specific security nor specific investment advice. One should always consult an investment professional before making any investment. Any investment decisions must in all cases be made by the reader or by his or her investment adviser. Do NOT ever purchase any security without doing sufficient research. There is no guarantee that the investment objectives outlined will actually come to pass. All opinions expressed herein are subject to change without notice. Neither the editor, employees, nor any of their affiliates shall have any liability for any loss sustained by anyone who has relied on the information provided. The analysis provided is based on both technical and fundamental research and is provided “as is” without warranty of any kind, either expressed or implied. Although the information contained is derived from sources which are believed to be reliable, they cannot be guaranteed. The information contained in this report is provided by Ridge Publishing Co. Inc. (Ridge). One of the principals of Ridge, Mr. David Moenning, is also President and majority shareholder of Heritage Capital Management, Inc. (HCM) a Chicago-based money management firm. HCM is registered with the U.S. Securities and Exchange Commission as an investment adviser. HCM also serves as a sub-advisor to other investment advisory firms. Ridge is a publisher and has not registered as an investment adviser. Neither HCM nor Ridge is registered as a broker-dealer. Employees and affiliates of HCM and Ridge may at times have positions in the securities referred to and may make purchases or sales of these securities while publications are in circulation. Editors will indicate whether they or HCM has a position in stocks or other securities mentioned in any publication. The disclosures will be accurate as of the time of publication and may change thereafter without notice. Investments in equities carry an inherent element of risk including the potential for significant loss of principal. Past performance is not an indication of future results. !========> |
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