If you are a history buff and enjoy investing you have probably read all there is to know from JP Morgan to Warren Buffet to the current whiz kids on the street. One of the most interesting reads I have ever encountered was Market Wizards which spawned the follow up Market Wizards II a number of years later. What I learned through most of my readings was that various systems, once employed, were void of error and led to great success. That was until they were unsuccessful.
One of the greatest economic minds of our time was Alan Greenspan. As Federal Reserve Chairman he held great power. He was credited with his hindsight when he made his “irrational exuberance” claim before the dot.com bubble burst. CNBC would actually run clips of him walking into the Fed meetings trying to determine economic policy by the size of his briefcase. During the times of folly, this seemed oddly acceptable. When the markets are running, the Butterfly Effect seems as out of place as Rush Limbaugh at an Al Sharpton rally. But looking back in hindsight, how much credence should you really place in one person’s opinion ? After the mortgage bubble burst, he recanted and said ”I was mistaken”.
This is not an indictment on a Federal Reserve Chairman. I don’t think anyone can discount his intentions or acumen on the markets. It only shows we are all human. One has to realize that when you invest your hard earned money you are the only one responsible for the results. You are the one that has to live with the consequences. You have learn to trade responsibly and stay within your guidelines. There is no safety net for the individual investor, nor will there ever be one.
Trade idea for the day
Overstock.com was oversold today, that was evident. But what we saw was to enter a position with very little risk and very good potential return. After a 7% drop in the price we went long at $19.65. We coupled this with a June 20 put option of which we paid $1.40. This gave us less than a 5% possible loss over the next two weeks, with unlimited gain potential. Break even is $21.05, which if reached, would give us a gain due to the fact the option would still have value. These are they types of trades you need to incorporate into your portfolio.
