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Out of the Past

Back in the late 1920's Fred Schwed was a Wall Street stock broker and left the business after the crash in 1929. In 1940, ten years after his exodus, he wrote Where Are the Customers' Yachts? about his experiences in the market. The book has gone through numerous reprints and editions and is endorsed by the likes of Michael Bloomberg, Jason Zweig, Michael Lewis and Jane Bryant Quinn, all glowing about Schwed's keen market insight and humorous prose. After 70 years, it's tough for an investing book to hold up, but this one seems to pass the test of time by not only being funny, but by talking about the specifics of the market in more of a general overview.

Where Are the Customers' Yachts? touches upon some of the age old investment topics such as options, short selling, technical analysis and investment trusts (mutual funds). It is ironic that the same problems that haunt the market today were prevalent generations ago. According to Schwed, options are confusing and unprofitable, mutual funds don't make money the majority of the time, technical analysis is unreliable and short sellers are to blame for everything wrong in the market, or at least that is the public sentiment. Sound familiar?

This past weekend in Investor's Business Daily there was an article about the evolution of financial applications available for the iPhone and Blackberry offered by some of the discount brokers. Now you can trade stocks, get price alerts and receive up to the minute articles and press releases on your favorite securities while on the go. In Fred Schwed's day traders stared at the trans-lux during trading hours for price movements and volume spikes, usually on the floor of the exchange or in a broker's office. You can be anywhere and be a trader now.

I'm no Luddite and a big fan of smartphones, but the portfolio churn you'll experience by paying too much attention to the day to day market fluctuations can't be good for your profits. Even Fred Schwed made comments on the perils of trading too much in Where Are the Customers' Yachts? and cautioned that the only parties that consistently make money in the market are the brokers with their commissions. Schwed also warned about bear raiders with their pump and dump schemes, statisticians with their misleading charts and graphs and economists who speak a lot and say absolutely nothing. Except for the computers and smartphones, it sounds like we are back in the 1930's again, doesn't it?

I've written ad nauseam about the poor performance of The Ithaca Experiment portfolio the past two months and will continue to do so for the foreseeable future. In actuality, the past two months my profits and losses have been in a stalemate, it's the two months before I began writing that took the largest losses. The reason that I include these losses in the blog is that it's where I started tracking the investments and I want to keep these posts honest and transparent. It would not be fair to me or you readers if I fudged the books. A geo-political event or a long overdue correction and I'm back in the ballgame. I may be in a standing eight count, but I'm not ready to throw in the towel yet.