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Investment Ideas and Timing

|Includes:DOG, SBB, ProShares Short S&P 500 ETF (SH), SKF, UNG, USO


"Timing is everything" goes the old adage. But all investors and traders know that timing an entry point or exit point of an investment idea and strategy is like predicting the weather without sophisticated radar equipment. In fact it might be more difficult.

Why? Not only because the fundamentals these days are enormously complicated, whether we are speaking of the stock markets, the bond markets, or the commodities markets, but because there are so many factors beyond our control and knowledge.

The "usual suspects" come to mind. The exchange specialists, the large instutional traders, the big financial firms with their trading desks, and now we are all competing with the Federal Reserve and the U.S. Treasury, who appear to be able to buy and sell anything they decide to whenever they want. Isn't that your perception as well?

So none of us can effectively "time the markets". We can look back with 20/20 hindsight and see where the markets have been. The main good that does is it tells us when something is historically cheap or expensive.

I heard a pundit on CNBC telling people yesterday (Thursday) that "...the stock market is overpriced, and when the S&P hits 1,000 you should short the market." I assume he would use investment vehicles like the "shorting ETFs" such as SH, DOG, SBB, and SKF. How can he say that so dogmatically? When to take the risk of shorting a market is a very difficult, risky call that isn't appropriate for everyone.

That is why many investment analysts write that "the trend is your friend" and that we shouldn't commit ourselves to an investment until that trend is "established". Would someone please tell me the short answer to how you do that?

The technicians like to use the Moving Averages and all those supposedly reliable sophisticated "indicators", but are they truly reliable enough to have a better than 50-50 chance of being right (and conversely of being wrong!). How many of them hit close to the stock market bottom during the March 8-9 time period?

Then there are commodities like precious metals and energy. Investors seem to like supply and production reports to gauge when to buy or sell.I was reading Gary Gordon's interesting article (see the link below). Some of the comments were surprising to me.

The idea that some report on the current supply of oil or natural gas would be a reliable enough piece of information to base a decision on whether to buy or sell an ETF like USO or UNG hasn't been accurately proved to me over the past 12 months.
Remember when they were telling us that the reason oil went to nearly $150 is because the demand was so badly outstripping the supply and we were in the throes of "Peak Oil"?
A few months later oil had "magically" dropped by 70%. Later we found out there had been a great deal of speculating and manipulation that drove the price way up and way down. 
So if you had the foresight, courage and conviction to buy when everyone was selling oil (especially true in the period between Dec.2008 and the end of February 2009) you'd be taking some profits off the table right now with huge gains to celebrate.

When it comes to the supply issues with natural gas, I'm a bit astounded at the apparent naivete of many of the comments at the end of Gary's article. Yes, recent storage data does speak of current oversupply, but that could change over the summer and perhaps that's what some traders are anticipating.

Like so many commodity markets, manipulation, computer-triggered programs and other collaboration by the big traders (the ones who can move a lot of money in and out of the market through exchanges like the COMEX in a NY minute) still play a predominant role (in my opinion). Come on people, it isn't an "all-or-nothing&a... opportunity.

No one knows what the "big players" are going to do next, and, we've all seen those so-called "reliable supply numbers" change all of a sudden or be altered by the approach of the first hurricane in the Gulf of Mexico.

I remember when oil was below $40 a barrel and all the supply reports were screaming "excess" and "over-supply" and the talking-heads were saying that we had too much oil for the next 12 to 18 months.

Sure enough, when the major market movers decided to move the oil price up, all of a sudden it started heading north and recently hit $73 a barrel, all on the perceived "green shoots" hope and hype. Give me a break!

If you think you can find the bottom in the natural gas market (or any investment market for that matter), all I can say is "good luck"!  I'd rather accumulate when a commodity,stock, bond, ETF, or mutual fund is historically cheap then pretend I can trust supply figures and my own sense of timing.

As my regular readers probably know, this very topic is why I wrote a free report titled "Five Secrets for Creating Wealth in a Financial Crisis" which you can receive by going to the home page of my web site.

Sadly, many of the best secrets, including how to be a "Black Swan Investor" are not widely talked about and that is why I included that as one of the "Secrets" in my report.

Warren Buffett isn't the only one who has learned the hard way that we "should be greedy when everyone is fearful, and fearful when everyone is greedy". But why don't the Uber-Investors remind us that "it doesn't have to be all-or-nothing".

We can be systematic sellers when "everyone is greedy" and systematic buyers when "everyone is fearful" and prices are plunging. That's why I wrote the recent article on the strategy of accumulating and being, like Jeremy Grantham puts it, "market neutral" during volatile times like these.

Greed, fear, and gullibility often get in the way of the retail investor. That is why many "older and more experienced" investment writers appreciate the disciplined approach which often includes dollar-cost-averaging on the buy-side and trailing stop-losses on the sell-side.

Investment ideas, supply reports, analysts opinions and "hot tips" can often burn holes in our pockets and our pocket-books. Keeping our emotions out of our investment decisions (which helps us with the "wisdom of doing nothing" most of the time) and having disciplines that we believe in can be our best approach.

"If you don't stand for something you'll fall for anything" is a saying that is as true as ever when it comes to being an investor or a speculator. This summer is a good time for each of us to do a personal "reality-check" on that subject and to examine our approach with more care (not fear) then ever before. I wish you good fortune and outstanding success!

Please Note: This article is to inform your thinking, not lead it. Only you can decide the best place for your money, and any decision you make will put your money at risk. Information or data included here may have already been overtaken by events – and must be verified elsewhere – should you choose to act on it. Please remember investments can fall as well as rise. And they will! - Advanced Investor Technologies LLC accepts no responsibility for any loss or damage resulting directly or indirectly from the use of this content.
Disclosure:  Of the funds I've mentioned in this article, UNG is the only one I'm currently long in.