Garybsmith

Trading, Golf, General thoughts. Not necessarily in that order.

Category: Trading

Thinking about Facebook

Don’t know if you noticed, but there’s a lot of talk about Facebook lately.  Or at least Facebook, the stock.

In fact, the question I’ve been asked most lately has been what I thought about FB.

The answer: nothing.  Oh, I know there’s a lot of talk about whether it was priced correctly.  Or whether institutions had insider knowledge.  Or how and why the Nasdaq screwed up fills.  And on and on.

But, I steered clear.  Not because I’m so smart about the stock.  In fact, I’m fairly agnostic for one simple reason: I have zero edge.  And 99% of us are in the same camp.

In fact, let’s compare 2 stocks, FB and say, MCD.  With the latter, you can look at it, touch it, and eat there, as well as see 30 years of financials and 30 years worth of stock charts.  In short, you can — if you study it enough — get a feel for how the stock might act in different situations.  With that knowledge, you can at least make an informed decision of when to buy and sell.

But with FB?  There are what, 3 days worth of stock history?  In addition, there’s questions reqarding how much they make, how much they will make and if this whole social network thing is a fad.  The stock may well soar…or it may bust.  I have no idea.

And because of that, I stayed away.  (I do think social networking is overblown, but I also thought Ipads were going to be a bust, so I’m not the best indicator.)

There are roughly 5000 other stocks to hone in on.  Why folks are obsessing about Facebook is kind of a mystery.

How did I miss Hershey??

I may have written about this before, and if so, forgive me.  But I was reminded the other day of a) how simple investing can be and b) how stupid I can be.

As for the investing part, I have a rule that I would estimate, works about 99% of the time.  And the rule is really simple: as soon as I start using a product or service (that I pay for), I should immediately buy the stock.  In fact, I bet the same applies to you.  Think back about the first time you used Netflix.  Or Googled something.  Or bought an Ipod.  Right: if you had bought NFLX, GOOG, or AAPL the very next day, you’d be swimming in money.

Now, I know this style doesn’t adhere to rigorous fundamental analysis, and surely not technical analysis…but it works.  And it seems to work on even the doggiest of stocks if you adhere to one other rule: as soon as you stop regularly using the product or service, you must immediately SELL the stock.

Case in point: I frequent Rite-Aid (RAD) frequently for the simple reason that it’s in the same area as the Safeway (SWY) we visit.  So, I own RAD stock.  But, if I ever stop going there and decide the Walgreen’s across the street is better, I’ll sell RAD and buy WAG.

In fact, I’m such a believer in this strategy, that I regularly do a mental scan to see if we’ve started using any new products that are made by companies listed on a U.S. exchange.  For example, we recently bought some new Head tennis racquets.  Love ’em, but the stock is listed on the Vienna exchange.  So, a no-go there.

Anyway, on a kitchen counter, we always have some snack stuff I can nibble on during the day, primarily pre and post cycling or tennis.  One of those jars used to contain some organic chocolate squares we’d buy from the local crunchy-food store, but we figured simple Reese’s peanut butter cups would have the same effect, and they’re a lot cheaper. I’ve been having about 2 or 3 a day since March.

Then, a few days ago, I hear on the news the Hershey company is killing it in revenue and profit.  A light goes off: “Wait, I’ve been eating Reese’s for a few months.  Are they made by Hershey??”  A quick Google search reveals the awful truth: they are, and I missed the big move.

 

 

Ugh.  That one was tough to take because once again, my personal usage pointed out a great stock.

On the other hand, it’s nice to know my strategy worked again.  Just wish I had the discipline to follow it!

 

Trading Hell

I haven’t talked a lot about trading this year because, well, there’s hasn’t been a lot of trading.  In fact, for most traders this has either been a year of HELL or a year of NOTHING.

As they say in Bridge, let’s review the bidding:

1.  For breakout traders, this has been the year of zilch.  Most breakout traders use volume surges as an indicator, and volume this year has been pitiful.  In fact, QQQ only today, recently moved above its 50 day moving average.  Of course, now the index is so overbought that any new long position is way too risky….

2.  For contrarian traders, it’s been a train wreck.  Sure everything is overbought, and the logical trade is to go short.   Ask the folks who shorted AAPL at $500 how that’s going.

3.  For dip buyers, it’s been famine.  One aspect of my own trading is dip buying.  I’ve had four trades so far this year.  Four.  Last year I had over 100.

4.  Buy and hold.  For those Warren Buffet types, it has been a wonderful year.  Truly.  I mean, just buy anything and it goes up.  Can’t wait for the Apple-only long hedge fund to shout how it’s KILLING IT this year.

But, I’ve gone through periods like this before.  Frankly, they suck.

The Facebook rebellion

This headline caught my eye the other day: “We’re getting less friendly on Facebook.”

http://www.washingtontimes.com/news/2012/feb/24/study-were-getting-less-friendly-on-facebook/?utm_source=RSS_Feed&utm_medium=RSS

Frankly, I’m not surprised and it finally dawned on me after watching 5 minutes of “The Social Network”: most of us aren’t in high school any longer!

Yes, I know that maybe some of us never mentally move on from high school:  our self-esteem is still measured by how much we’re “liked”; we still gravitate to the “popular” people; and we still want to be seen as cool.

Now, don’t get me wrong:  I was just as guilty as the next guy.  It was fun, for at least awhile, to catch up on old acquaintances, and — let’s face it — to see what everyone looks like 30/40 years later.  But, once that was done?  Not really much of interest, I’m afraid.

In fact, as many of us get older, we seem to reach a state where we don’t really care all that much what others think (and especially what they think of us.)

In essence, Facebook is like the pathetic middle-aged guy going through mid-life crisis who takes up with 20 year olds.  It’s fun, but only for awhile.  Then the guy realizes, that wait: he’s not 20 years old any longer!

Now maybe FB can be fueled by an endless stream of high school and college kids.  But, I think for the vast majority of anyone over 25, they’ll be checking out.

 

We really should keep score.

Was watching the biz news this morning,  and some talking head was paraded in front of the panel to give his prediction for the market.   (I’ve been that talking head, btw, so I’m specifically not dissing those kind of segments.)

It struck me, though, that I had no idea what kind of track record the fellow had.  I mean if I’m watching the Nationals play, I know a fellow’s batting average as soon as he steps to the plate.  And if I’m really hard core, I can find out how he hits against right-handers, left-handers, and even that specific pitcher.

And with sports commentators, we normally get well-established, track record kind of guys.  I know a Digger Phelps or Jon Gruden has some merit because they have a solid resume.

But, with financial guys?  Well, we never really know unless he manages a mutual fund and we can look up the fund’s performance.

Seems to me, every time a market guru gives his opinion, there should be a subtitle below his name giving at least his year-to-date performance.  Even better, I guess, would be his lifetime performance.  That would allow me to put his prediction in some kind of context.

That’s not to say gurus bring nothing to the table even if they had a terrible track record.  Most political commentators bat less than .500 when predicting election results, but I listen to what they say because they help sort out things I may not be able to grasp.

That’s the same kind of thing we try to do on Bulls & Bears, for example, even if our personal batting average may not be too spiffy.

Still, it’d be interesting to see some kind of performance stat.  Just not sure I’d like to see mine.

 

Have a plan; stick to the plan!

This past week, Nancy ventured to the Mid-Atlantic Erg Sprints to compete in the “Veteran Women 30-minute row.”  Now, the Erg Sprints is a funny kind of event: an indoor race, in the middle of winter, surrounded by a bunch of other crazies pulling as hard as they can on an indoor rower.

Surprisingly, these events are well-attended.

Now my job is nothing more than to “cox” which is a glorified way of saying “be supportive.”

The hard part, of course, is the actual erging and it’s the kind of slow torture I have studiously avoided each and every year.

That said, I’m always willing to help out as long as it doesn’t involve any heavy lifting.   In fact, all I had to do was ensure Nancy had a plan and stuck to it.

Of course, that’s the important part and where most people fail.  It’s not the actual erging that dooms them, but rather pulling willy-nilly with no concept of either an end goal or how best to get there.  (As a sidenote, this is also what dooms 99% of traders…)

Anyway, Nancy DID have a plan and was nice enough to write it down for me so I wouldn’t mess up my one and only job.

(Yes, that’s the actual hand-written note soon to be displayed in the Rowing Hall of Fame….)

And that job was to simply ensure she hit those numbers: neither too high, nor too low.   A 2:11.6 average was either going to win the event or someone in better shape was going to beat her.  But, 2:11.6 was right around the best she could expect.

Sure enough, she held close to every time check and even kicked a little at the end to come in 11 meters ahead of plan at 6845.  Hard, of course, but fairly routine.  No wasted effort, no panicking when other rowers lurched ahead at the start, and no desperate attempts in the waning minutes to make up lost ground.

She did gather up the blue ribbon, and it was a pretty sweet ending.

Of course, she gets full credit for a fairly exhausting 30 minutes of activity.  Still, I can’t help thinking it was that rigorous attention to a well thought out plan that really won the day.

My reading list or lack thereof

A friend turned me onto a neat Ipad app called Zite.  Basically, it’s an online magazine that compiles articles under topics you’ve selected.

So, my topic headings are stuff like  “exercise, “bicyling, and “Redskins.”

Ironically, I don’t have anything about the market or trading.  In fact, I don’t even have anything on business at all.

Now the reason isn’t that I think I know everything about trading.  Far from it.  But, I do have — hopefully — a few reasonable methods to make money in most types of markets.  And after doing this for 25+ years, what I realize is that it’s probably better to stick with what I know, rather than continuing to muck things up with new-fangled ideas.

In short, I think one gets to the point that less input is a good thing as it allows you to concentrate on what you do best.  I hope that’s where I’m at right now.

The art of trying less

Nancy and I were watching the Winter X Games this past weekend.  Ironic, because I do zero winter sports and really don’t know much about any of the events.  But I do know who Shaun White is, and have seen his brilliance on the half-pipe quite a few times.

What caught my ear, though, was that one competitor — Louie Vito — had decided to really REALLY focus on his training, foregoing alcohol, working on his fitness, etc. etc.

When I heard that, I knew he was doomed.  You see, Louie Vito was already a top contender, and it’s been my experience that when top contenders try to get to the next level by “outworking” the competition, something usually breaks.  And normally it’s their own success.

I saw the same thing with the Olympic Marathon trials (trust me, I’m a connoisseur of esoteric athletic events on TV): a bunch of top runners who decided that in order to move from say 10th, to the podium, were simply going to train more.  Inevitably, they did worse.

In fact, I noticed almost all the athletes who trained less, whether by design or something like injury, did outstanding.

What’s this all have to do with anything?  I think when you’re in the formative stages of development, throwing more and more effort at something is a good thing.

But…once you reach a stage of solid competence, less is usually more.  This is particularly true of trading.  You work, study and experiment until you come up with a satisfactory way to make consistent money. And then, in some vain attempt to be “the best trader ever” you decide to do MORE: more analysis, more trades, more complexity, until finally you succeed…in losing money.

So, I guess my point is this: it’s fine, of course, to try to be at the top of the heap.  But, once you get pretty good, it’s usually not MORE that will get you there.  Instead, it’s either “different” or even “less” that’s the key.

Enough with the 3-day weekends!

I guess today marks the end of the 3-day weekends for awhile and I have to tell you, I’m happy about it.

Early in my life, I used to relish an extra day off.  Now I find it takes me completely out of my rhythm.  It’s not that I spend so much time trading or even looking at the market, but I do spend enough time here and there throughout the day where a void makes a noticeable difference.

In any event, I’m always happier when the market opens up Tuesday morning.  Gives me something to do post-breakfast / pre-workout.

As for the market and my trading, my rear end is catching a lot of splinters.  I did finally do one purchase on Friday (KO), but that’s about it.  And while I’m certain we’ll get a selloff at some point (let me guess: European crisis of some sort…), I really have to wait until things fall into my buy zone.

Right now I’m looking at MA, VZ, GOOG, and PEP, but all those need to drop a bit further.

Until then all I can do is sit and watch.   I see the next 3-day weekend is Presidents Day, and that’s only a month away.  Ugh.

 

 

Idiotic obsessing.

For the past few weeks, I’ve been obsessing about, of all things, the saddle height on my bike.  Now, you may find this hard to believe, but there are a number of scientific ways to figure out the exact number — to 3 decimal places no less! — the perfect height.  Think I’m kidding?  Here’s one method:

Also using inseam length as a guide, this formula calculates 88.3% of your inseam length and uses it to measure the distance from the centre of the bottom bracket to the top of the seat height.

Of course, it doesn’t stop there with such procedures as the “Holmes Method” advocating the use of a goniometer for

measuring the angle of the knee joint at the bottom of the pedal stroke. Holmes recommends an angle of between 25 and 35 degrees and closer to 25 for those with a history of patella tendonitis.

Naturally, I’ve been going crazy trying to figure out which method and which measurement will give me the “right” number, and usual, started obsessing about it.  I finally realized I’d gone overboard when I stumbled upon Sheldon Brown’s (noted common sense bike guru) simple advice:

 “I suggest gradually raising your saddle, perhaps half an inch (1 cm) at a time. Each time you raise it, ride the bike. If it doesn’t feel noticeably worse to ride, ride it for at least a couple of miles/km.

If it had been too low before, your bike will feel lighter and faster with the new riding position. If raising the saddle improved things, raise it again, and ride some more. Keep doing this until the saddle is finally too high, then lower it just a bit.”

Ah, there you have it.  Keep raising it until it’s too high, then move it down a bit!  Simple and straightforward.

Anyway, I bring this up because if you’re like me, you tend to do the same damn thing to with trading: you make it WAY too complicated when simple would work a lot better.

In fact, in looking back at the history of my trading, my simple strategies (usually along the lines of buying stock in companies I use and holding them until they go up!) are invariably the most profitable.

So, in 2012 I’m going to obsess a little less and just stick to the simple stuff.  Yes, 25 years of trading and I’m finally discovering simple trumps “smart.”