About Me

Retired chief investment officer and former NYSE firm partner with 50 plus years experience in field as analyst / economist, portfolio manager / trader, and CIO who has superb track record with multi $billion equities and fixed income portfolios. Advanced degrees, CFA. Having done much professional writing as a young guy, I now have a cryptic style. 40 years down on and around The Street confirms: CAVEAT EMPTOR IN SPADES !!!

Wednesday, July 23, 2008

Shoot First, Ask Questions Later....

The above is a once popular adage for traders to move quickly on
dramatic changes in price and enquire at their leisure what the
causative factors may be. The idea is clear enough : If one plunges
into an analysis of factors behind sudden change, the work time
might bring one too late to the party. Balance that admonition
with the realization that many of you are competing against large,
mobile pools of capital that may have better short term info than
you and have the wherewithal to reverse course on a dime to
pursue a newly hot trade.

The fast downward break in oil and natural gas prices has helped
shepard in a rapid price decline in the commodities markets. The oil
move is complex -- rapid profit taking in the wake of a short run
momentum failure, concerns about greater demand weakness, the
spectre of Congressional meddling in the futures market. But a
rapid decline in costs to consumers and business promotes a
healthier economic environment. Presto! as commodities dip,
the equities market come back to life, with the most depressed
issues such as airlines and banks leading the way.

What is interesting in the moment, is the dramatic changes have
come so quickly and forcefully that new short term trend
confirmations have not been established yet. The charts are
"cuspy" but are not there yet. As one who likes to control his
risk, my impulse is to take profits, await the trend signal, then
return on the first test. Each of us has his/her own preferences in
fast markets like this. Just do not get greedy and go for the top or
bottom ticks.

No comments: