David Van Knapp

Coach: Growth and Growth Yield at a Reasonable Price

Agree. If one's strategic approach is to basicallly separate capital appreciation strategies from dividend growth strategies (which is my approach for categorizing stock investing), then a 0.9% yield is almost irrelevant to a capital-appreciation analysis of a stock, and it is also insufficient to qualify the stock as a dividend stock candidate.

Although the author suggests that the initiation of a dividend could turn Coach into a growth + income story, he also suggests that the company may hold its payout ratio steady. If that's the case, obviously, the dividend will increase at the same rate as earnings. But over long terms, a stock's price also tends to increase at the same rate as its earnings. Thus, chances are that Coach's yield will stay at or around 0.9%. So even though the company increases its dividend distribution each year, its current yield will hover around 1%, in which case the stock will never become a "dividend stock" candidate.

October 2009 Existing Home Sales: Government-Sponsored Surge in Home Sales Continues

Guess you don't like the tax credit for home sales, huh? What about Bush's reduced tax on dividends...was that OK withya? OK to pay less tax on stocks held > 1 year than < 1 year? OK withya? Do ya really think that the real estate business has been a good business to be in the last year or two? Bringin' home the bacon? Know anybody trying to make aliving selling houses? 'Cause that's not what they tell me.

Tax policy has always been used to promote social and economic policies. Always has been, always will be. If your point is that the tax credit on home sales has changed home sales statistics from what they would have been without the tax credit, please tell us something we don't already know. THAT WAS THE POINT. Just like more companies began issuing and raising dividends when the tax on dividend income was cut.

If you want to argue that it was a bad idea, then state your case. You know, maybe a cost-benefit analysis, or a philosophical piece about the moral hazard of assisting homebuyers in a time of severe recession. But just posting statistics that show the tax credit has impacted the number of homes sold doesn't make any point at all. Duh.

Time to Analyze the Russell 2000

Agreed. BTW, the reason I said "potential" was the key is not that it helps you determine whether there's enough potential reward to enter the trade, although that, of course, is important. My reason was that the word "potential" implies that you don't know the outcome...so it's potential reward vs. risk of failure, and the units of measure are dollars (rather than, say, percentages).

This is important, because, as you know, some traders approach trading as if they know, in advance, what the outcome is going to be. They're so sure of it that they double down on losing bets, increase the risk/reward ratio by using massive leverage, "average down," and so on. They used to be employed at places such as LTCM, Enron, Bear Stearns, Lehman, Merrill Lynch, etc. Some of them are still plying their trade at GS, BAC, most hedge funds, etc. They scare the wits out of me...not because they may fail, but because some of their utter mis-apprehension of risk ends up getting paid for by me as a taxpayer.

That's one of the reasons I find your disciplined approach attractive. In poker, you gotta know when the potential risk/reward ratio is good enough to bet, and you also gotta know when to fold 'em. Same way in stocks.

Still the 'Most Hated Rally in History'

The author is right. These charts are pretty simple. The market's gone up for 8 months, and the trend is still up. Anybody who "hates" the rally is emotionally invested, and that's a self-defeating approach. Anybody who's been shorting stuff in anticipation of the market turning has been playing a losing game for 8 months, and they've lost a lot of money. All the "fundamentals" pointing in what some see as the opposite direction don't mean squat. Perhaps the way that lots of the "fundamentalists" interpret the data has been all wrong...by ignoring time lags between economic events and market events, for example. This isn't Jeopardy, it's the market, play the hand you're dealt.

Testing the Performance of Price-to-Book Value

Also interesting: Only 8 of the 30 haveprices above $5/share. That makes them ineligible for most institutional trading. It will be interesting to see the results of this real-time study in several years; hope you keep it going that long. I'm assuming you're not looking at this as a short-term timing/trading indicator.

The Dow at 4000? Don't Laugh, It Could Easily Happen

Why anticipate the turn before it happens? Ride the trend up with sell stops that you are comfortable with (I use 8% trailing stops). If they get hit, then you can put the defensive--or even a foxhole--game plan into place.

BTW, I don't think history supports the statement that Democratic control usually hurts Wall Street. Also, how did you place a number (30%) on the possibility that the Dow will drop to 4000? Just a guess, or do you have a methodology you'd like to share?

Your list of personal measures is a good one, although, as in the first paragraph, I don't see why you'd short anything at the moment. BTW, if you still have a mortgage debt, paying it off is a good investment if you think there's no positive place for your money.

Weak Weekly Market Wrap-Up: Primed for a Correction

5519 Followers and not a single comment? Seems rigged.

How to Safely Play the Short Side of This Market

Why do you want to be short the market when it's going up? This kind of thinking has hammered short-siders for the last 8 months, and there has been a massive self-inflicted transfer of wealth from short-siders to those who are long. Is this some sort of masochistic game with deep psychological rewards? Because from the simpleton view of actually making money, it's been a sucker's bet all along.

Wall Street Breakfast: Must-Know News

In the Microsoft/Google battle, on a moral-ethical basis, I don't know who to root for. Microsoft's been convicted of anti-trust violations, and Google runs roughshod over everything in their way, such as privacy concerns and legal inconveniences like copyrights. It's like a knife fight between the two biggest thugs in the neighborhood.

Time to Analyze the Russell 2000

Interesting. I rarely have a price target. I'm only interested in direction. I figure the actual outcomes will take care of themselves if I get the directional part right.

So my only consideration is, what is the probability that X will continue to go up [or down] for some meaningful time? As long as the answer to that question is "up," I stay in. So I don't have a predetermined exit point on the way up. I don't "protect profits" by taking some of them off the table after, say, a 40% gain, as some seem to. I don't try to anticipate the inevitable turn downward. I just keep asking the question.

My protection, of course is from sell stops. Those are at a predetermined level that I just keep trailing along behind the actual price. I usually use a percentage (I've ridden this entire rally with an 8% traveling stop that's never been hit), sometimes use a MA, and very rarely use a lower trend line. But percentages are quick and simple, easy to figure, and the result is usually within a whisker of using one of the other methods anyway. So that's my only "target," the downside stop point, which I hope is never hit.

BTW, the reason I asked the question is that I'm fascinated by the subject of risk, particularly when people seem to claim they know what the risk is in advance. So for me, the key word in your answer was "potential."

Thanks again. Dave

Market Volume: Still an Unanswered Question

Seeking Truth,
Thanks for the response, this dialogue is hepful. I have one more question. If your stops aren't hit, then presumably, you are getting satisfactory results from the investment you are already in. If that's the case (and maybe what I just stated is incorrect), why take profits? The main reason for asking is, what do you do with them? Just keep them in cash? Invest them elsewhere? What "elsewhere" is better than an investment that's going up? Again, not trying to be a wise guy, I'm just very interested in why people "protect profits" in an up market (let alone short the market in an attempt to anticipate its turning point, which you have not said you do). Thanks again.

Market Volume: Still an Unanswered Question

Seeking Truth:

Gotta disagree with you about "reasonably tight" sell stops taking one out of the market in June/July. This may be a semantic difference only, or it could be a meaningful difference in the concept of what is a tight sell-stop.

Anyway, It took me about 20 trades (all purchases) to leg into the market rally between March and June. I'm very boring, I just put an 8% sell-stop underneath everything, and kept moving it upward at a constant 8% whenever the market hit a new high. I'm not anal about it, I may have missed a day here or there, but for sure every Friday I updated the stops if the market went up that week.

None of those stops has ever been hit. All the purchases are still invested. 100% of my "stock money" is actually in stocks. July came close, but it did not take me out of the market.

What do you consider to be a "reasonably tight" stop? Obviously, I consider 8% to be reasonably tight. In a market in which I had more confidence, my usual stop might be 12%-15%. Are you tinking more in the 2%-3% range?

Time to Analyze the Russell 2000

Suzanne, another interesting post. How do you define "risk/reward"?

Thanks, Dave

Market Volume: Still an Unanswered Question

untrusting:

Thanks for the comprehensive answer to my question, and for the link, which I will study. I like fact-based information, so I'm looking forward to reading it. Your explanation was very helpful.

So maybe I'm just lucky, but I do fall into the camp you mention that was all-cash in March, then started buying into the rally in April, based on simple trend observation coupled with a belief that the recession was, indeed, moderating. I have been 100% invested since June-July. I consider the ideal holding period "forever" along with Buffett, but I'm no fool, and all my positions are protected with pretty tight sell-stops, none of which has been hit for the entire length of this rally.

I fully understand why you (and the others you mentioned) don't consider this a favorable long-term entry point. That said, though, I have difficulty understanding the many who are "establishing short positions" (as they put it) in anticipation of the coming crash. The crash has been widely forecast since the rally started, and if the posters were actually trading the way they've been describing, they've gotten hammered in the last 8 months. In fact, there has been a massive transfer of wealth from those who have played the last 8 months net short to those of us who have played it long.

Again, thanks for the info and the link. I'm anticipating that after I read everything, I'll probably conclude that volume is a useful, but by no means infallible, indicator. Simple observation of trends may trump it, as seems to have happened this time.

Getting Technical: The Humpy Trend Lives

It all depends on your trading timeframe. If you're trying to catch and trade each and every one of those humps, you need to be thinking in very short timeframes or very small drawdowns, and then have a quick trigger finger for getting back in. On the other hand, if you just draw a trendline straight through the humps, then none of them has yet made a difference. A 3-straight-days decline is nothing to think about...just noise.

I'm in the latter camp. I've got my sell-stops set (most recent high minus 8%), and I don't try to get more granular than that. There has been no 8% correction the entire length of this rally (starting March 10), so after legging my way back into the market starting from an all-cash position in early April, I've been long the entire time and caught all of the rally so far.