Larry Cyna

Larry Cyna
Contributor since: 2012
A stop loss just doesn't do the job for a regular investor. Every stock bounces up and down from time to time, and your stop loss will be triggered over and over and over again before the next market meltdown. Problem with the stop loss is it turns to a market order when triggered. That means if a stock is $100 and the trigger is $80, the stock will keep selling until filled. You are not protected at $80. Your protection is only as good as whatever the price that anyone is willing to pay.
As an example, yesterday on the TSX, a stock called Orbit was trading at roughly $2.60. Within a minute, it had repeated sales until it hit $1.31. 10 minutes later, it was back up to $2.31. It is a classic example of how a stop loss can really hurt you. Afterwards many of those trades were cancelled or wiped from the records, but the example is a good one. It shows how badly you can get hurt.
If you use a stop loss, you must also set upper and lower limits on the stop loss. That means on the above example, you specify that you will not sell less than $75 (an example). If the stock hits $75 on your $80 stop loss, your stop loss is then cancelled. That means you won't sell at $20. That way you can only get hurt a little bit more. If your broker doesn't explain this to you, you have an issue.
Anyone investing in the market must be prepared for the occasional violent fluctuation, and stay the course. If you pick almost any decent stock, you will find that it fell dramatically in 2008, but afterwards it recovered some of its value - in some cases more than it had before. If you had stop losses in, you would have been stopped out, lost your money, and not been able to afford buying the same position.
There is no such thing as buy and hold any more. If you can afford to invest, you must be prepared to watch the market. You also must be prepared to watch charts. If a stocks pattern has shown a large rise, it will often correct back down. have patience. Buy in again when the stock has moderated..
You have to be the master of your own destiny. When you have made a profit, be happy and move on. Having the capital to invest again is the most important part of investing.
Sorry for short answer, but books could be written in answer to your questions.
The issue is one of commercial competitiveness. As the US dollar weakens, whether through currency devaluation (printing money) or industrial competitiveness (wage and energy costs), the engine that is the heart of the USA economic juggernaut receives fuel, and the roars to life. The USA remains the largest (by far) economic force in the world, and will remain so.
Interesting outpouring of emotion. What I also found interesting, is that Louise Yamada, the noted technician, on the day after my blog was published, essentially repeated my comments. Her last sentence says the same as what I said - buy gold juniors. Her comments follow:
Louise Yamada on Gold: The daily momentum is negative
Louise Yamada from Louise Yamada Technical Research Advisors LLC is one of the best technicians on the street along with Scott Redler (T3 Live) and the Aden Sisters (Aden Forecast).
She recently told King World News this about Gold:
"The daily momentum (not shown) is negative reflecting the consolidation underway but does not preclude further risk. The weekly momentum (not shown) remains positive but is rolling over, suggestive of a consolidation in progress unless a renewed Sell signal comes into place."
Bottom Line: Gold is close to entering my potential downside target of $1630-$1670. In the next few days, stop orders could get triggered sending the yellow metal here. Gold shouldn't stay in this zone very long and I am getting my piggy bank ready to cash it in for some gold juniors.
I remain heavily invested in gold equities in particular two gold juniors that continue to hold up well (knock on wood) during this consolidation.
I muse about the 'correct price' which seems to me to be more a function of 'time'. Gold has had strong support recently in Central banks adding to stockpiles and in a resurgence of demand in India. In spite of this, it again seems to have stalled below its last high. This is in spite of continuing debt and liquidity problems around the world. Unless some event occurs to propel the price, we may be in a bit of a range bound trend for gold for a while. I don't think we will see a large downturn as we did in the 80's in the near future, but I also don't see a near term catalyst to propel gold dramatically higher. All factors that could have driven it higher have been in evidence for a while.
ORCO - this is a marvelous deposit in Mexico and each bit of additional drilling seems to be expanding the deposit. PAA signed a deal with them that seemed ludicrous in terms of what they gave, so it is not a surprise that in due course, PAA walked away. There was simply not enough value left for them. I still own this stock and think it is a good one.
In viewing gold, the basic view has to be whether gold will continue its dramatic rise, which made gold bugs so correct, or whether it will fizzle out as it did the last time in the 1980's. Printing money has historically given hard assets greater value. The fly in the ointment here, is that gold does not necessarily rise with inflation. Rather the opposite occurs.
That depends on whether you believe, as gold buffs do, that every dollar printed increases the value of gold.
Thanks. Have a look at a bunch of articles that I posted on Instablog.
One of the other oddities of gold, contrary to popular belief, is that it often tends to rise and fall with the general stock market. If you track gold against the DJIA, they often rise and fall in parallel. The latest tracking of gold, shows that as the markets moderated over the last few months, so did gold. As the markets are now showing some life, so is gold.
Gold is an interesting commodity. Unfortunately, it does not trade solely upon market factors. Firstly, there a market in gold that is affected by governments adding or reducing their gold holdings. Currently governments are adding to their holdings, but these decisions are made at high government levels. It is often difficult to foresee future political decisions. Secondly, gold does not always react to the printing of money. It is not historically the value preserver that is commonly believed. Higher interest rates often put downward pressure on gold as gold becomes expensive to hold with no return. Finally, if you track the increase in the price of gold and compare it to other metals and commodities, gold seems to have a comparable increase in value to many of those other commodities. Gold is a strange hybrid of a commodity and a belief of value.
You have a reasoned approach. The age old question is at what point do investors look back and say "I wish I would have...". The world runs in economic cycles. Each cycle runs its course, ending in failure and losses, and out of the ashes comes the next cycle. There was little rationale for the artificiality of the drop in 2008 and 2009 where because of politics and greed, things ran amok. At the same time, there was little rationale for the rise in values over the last 4 years.
Yet today, in spite of the gloom and doom (see my latest article), stocks and commodities are now trading in a narrow range, and have been doing so during these summer doldrums. I think this means that most people have a similar attitude of wait and see. The number of dollars on the sidelines, in money market funds and dividend funds continues to grow and is staggering in its enormity.
Yet we see little interest in the market. I think that what is important, is that the end of cycles such as we are in now, weeds out many companies, and the ones with good assets, cash and staying power, are proving their worth. Whether the next cycle is powered by new technological advancements, or by new ideas, or the race for space, I don't know. What I do know, is that those value-rich companies are a bargain today. If anyone were able to tell the exact bottom of a cycle and buy at that point, it would be a marvelous thing, but picking such a point to enter remains a matter of luck rather than anything else.
My point is that if a stock is so cheap now that by all reasonable metrics it has excellent value and staying power, it is a good idea to enter now, rather than wait.
Thanks very much for your comments. I appreciate the feedback.