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David Moenning is a the Chief Investment Officer at Heritage Capital, which focuses on active risk management of the U.S. stock market. Dave is also the proprietor of StateoftheMarkets.com, which provides free and subscription-based portfolio services. Dave began his investment career in 1980... More
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Daily State of the Markets
  • Time For A Portfolio Pep Talk 2 comments
    May 15, 2014 8:10 AM

    Daily State of the Markets
    Thursday, May 15, 2014

    To say that this is a tough market may be the understatement of the year so far. Lots of areas are getting beaten to a pulp daily, the economy has sputtered, the masses have been fooled by the direction of interest rates, there is a new so-called crisis every time you turn around, and as a result, it has been oh-so easy to be in the wrong stuff at the wrong time. And yet through it all, the Dow Jones Industrial Average and the S&P 500 remain just one day off their all-time highs.

    But your Google (NASDAQ: GOOGL) shares are down on the year. Your Netflix (NASDAQ: NFLX) holding has struggled. Your Biotech ETF (NYSE: XBI) is giving you fits. You now avoid looking at your social media positions (NASDAQ: SOCL). And even your trusty Amazon (NASDAQ: AMZN) is sporting some fairly serious red ink right about now.

    From Worst to First And...

    And then to make matters worse, all the things that stunk up the joint last year seem to be doing pretty well this year. That's right, those emerging market ETF's (NYSE: EEM) would be making you smile right about now. Europe (NYSE: EZU) is marching higher. India (NYSE EPI) and Turkey (NYSE: TUR) are rockin'. Real Estate (NYSE: IYR) is movin' on up. And agriculture (NYSE: DBA) is a great position these days. Oh, and those bonds (NYSE: IEF, AGG, LQD) that everyone was so afraid of coming into 2014... yep, they have been working nicely.

    In short, the stuff that wasn't working is now working. And the areas which were working, now aren't - at all. So, make no mistake about it; it's tough out there right now.

    But Don't Despair

    Believe it or not, this quick review of the market situation is not intended to discourage you. No, just the opposite actually. You see, it is vital for investors to recognize that there are times when Ms. Market's game is a piece of cake and making money is a snap. But then there are other times when it seems nearly impossible to make any headway in your portfolio. And this dear readers, appears to be an example of the latter.

    The problem is this is the type of environment where individual investors - especially those trying to trade the markets - can lose their way. This is when people give up on their strategies. This is when the grass looks greener on the other side of the indicator fence. And this is when folks tend to throw up their hands in frustration.

    But here's the good news: this too shall pass. At some point, perhaps soon, a meaningful move will begin. And the point is that you need to be ready, willing and able to take advantage when the next big move comes along.

    Remember, You've Got to Be Ready

    When the time comes, you've got to have a clear head. You've got to be ready to a make a move. You can't be mired in misery after a few crummy trades or a bad stretch in the market. No, you have to have the ability to step up to the plate with confidence.

    In other words, you've got to have a plan or a strategy designed to tell you that the game is about to get easy again.

    Easier said than done, right? So, the question, of course, is how does one accomplish this task? How do you deal with the nightmare that is 2014's stock market and still have the ability and the courage to make the move that could wind up making your year?

    One Answer Is To...

    One answer is to have (a) a disciplined approach that you can believe in and (b) the commitment to stick with it during the "sloppy" times (like we're seeing now).

    To be sure, such an approach isn't for everyone. First of all, finding a system or a strategy that works well during most environments can be a challenge. Then there is the issue of being able "live with" your chosen approach for the long-term.

    But, Please Understand...

    Should you choose such a path, please understand that your faith in your chosen approach WILL be challenged at times. You WILL, absolutely, positively feel like a dummy for doing what you are doing on occasion. You WILL want to quit. You WILL be told you are wrong. And you WILL most definitely want to "tinker" with your approach or strategy when things get tough.

    However (btw - it is best to imagine an evangelist preaching this next part to you) IF you believe in your approach, then by all means, have the tenacity to stick with it when the road gets bumpy!

    Understand that there is no such thing as a "Holy Grail" in investing. All strategies have flaws. All systems struggle from time to time. And every single approach to the market will make you question them from time to time.

    Wanna Be Like Buffett?

    Perhaps the best example of this point would be legendary investor Warren Buffett. Today, the "Oracle of Omaha" is viewed as one of, if not the greatest investor of all time. When Buffett talks, people listen.

    "Buy when there is blood in the streets," Buffett opines. And Buffett did just that when he saved Goldman Sachs (NYSE: GS) in 2008. But, do you remember how that investment in GS performed immediately after he made it? In short, it wasn't pretty. But that deal eventually worked out really well for Buffett and his partners - because they believed in what they were doing.

    And in case you've forgotten, Buffett was also the butt of jokes in the investment community as the tech bubble raged in the late 1990's. Mr. Buffett proclaimed quite publicly that he didn't "understand technology" (which we later learned meant that he believed the valuations in tech had become ridiculous) and he wasn't going to partake in the tech party taking place on Wall Street. And we all know how that turned out.

    The point this morning is to understand that sometimes Ms. Market's game is hard and that you've got to have a little faith in what you are doing. While this sentiment may sound incredibly simplistic, experienced investors will concur that sometimes a little pep talk can go a long way. So, here's wishing everyone the best of luck out there!

    Publishing Note: I am traveling Friday through Wednesday and will publish morning commentaries as time permits.

    Looking For Investment Management Help?

    If you are looking for help with money management, check out Heritage Capital Management's Active Risk Manager Service - or call Heritage for more information at (630) 250-4700.

    ALL NEW: The Next Generation of the Daily Decision system is now available to clients of Heritage Capital. The upgraded system utilizes swing trading and mean reversion strategies during neutral market environments, multiple indices for long positions, incremental moves in and out of the market, multiple managers and multiple strategies - with the overall goal being reduced volatility, fewer and less impactful whipsaws, and a "smoother ride." To learn more about the "Next Generation" system, Read the Research Report

    Turning to This Morning...

    The ECB is openly talking about policy measures designed to stimulate the Eurozone economy today while the Bank of England is discussing when the first rate hikes are to be expected. Here at home, investors will be focused on the macro data and the question of whether or not the blue chip indices can push higher in the near term. Currently U.S. futures point to a modest pullback at the open.

    Pre-Game Indicators

    Here are the Pre-Market indicators we review each morning before the opening bell...

    Major Foreign Markets:
    - Japan: -0.13%
    - Hong Kong: +1.03%
    - Shanghai: -0.13%
    - London: -0.12%
    - Germany: -0.16%
    - France: -0.18%
    - Italy: -0.48%
    - Spain: -0.22%

    Crude Oil Futures: +$0.29 to $101.99

    Gold: +$10.10 at $1304.90

    Dollar: higher against the yen and pound, lower vs. euro

    10-Year Bond Yield: Currently trading at 2.576%

    Stock Futures Ahead of Open in U.S. (relative to fair value):
    - S&P 500: -2.40
    - Dow Jones Industrial Average: -9
    - NASDAQ Composite: -5.73

    Thought For The Day...

    "It's a beautiful day, don't let it get away" -Bono

    Positions in stocks mentioned: none

    Follow Me on Twitter: @StateDave


    The opinions and forecasts expressed herein are those of Mr. David Moenning and may not actually come to pass. Mr. Moenning's opinions and viewpoints regarding the future of the markets should not be construed as recommendations. The analysis and information in this report and on our website is for informational purposes only. No part of the material presented in this report or on our websites is intended as an investment recommendation or investment advice. Neither the information nor any opinion expressed nor any Portfolio constitutes a solicitation to purchase or sell securities or any investment program. The opinions and forecasts expressed are those of the editors of StateoftheMarkets.com and may not actually come to pass. The opinions and viewpoints regarding the future of the markets should not be construed as recommendations of any specific security nor specific investment advice. One should always consult an investment professional before making any investment.

    Any investment decisions must in all cases be made by the reader or by his or her investment adviser. Do NOT ever purchase any security without doing sufficient research. There is no guarantee that the investment objectives outlined will actually come to pass. All opinions expressed herein are subject to change without notice. Neither the editor, employees, nor any of their affiliates shall have any liability for any loss sustained by anyone who has relied on the information provided.

    The analysis provided is based on both technical and fundamental research and is provided "as is" without warranty of any kind, either expressed or implied. Although the information contained is derived from sources which are believed to be reliable, they cannot be guaranteed.

    The information contained in this report is provided by Ridge Publishing Co. Inc. (Ridge). One of the principals of Ridge, Mr. David Moenning, is also President and majority shareholder of Heritage Capital Management, Inc. (HCM) a Chicago-based money management firm. HCM is registered as an investment adviser. HCM also serves as a sub-advisor to other investment advisory firms. Ridge is a publisher and has not registered as an investment adviser. Neither HCM nor Ridge is registered as a broker-dealer.

    Employees and affiliates of HCM and Ridge may at times have positions in the securities referred to and may make purchases or sales of these securities while publications are in circulation. Editors will indicate whether they or HCM has a position in stocks or other securities mentioned in any publication. The disclosures will be accurate as of the time of publication and may change thereafter without notice.

    Investments in equities carry an inherent element of risk including the potential for significant loss of principal. Past performance is not an indication of future results.

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Comments (2)
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  • sidgreen60
    , contributor
    Comments (21) | Send Message
     
    Some really good points when if comes to investing. Sometimes you just have to keep your head up and keep working and never get too high or too low.
    15 May 2014, 08:48 AM Reply Like
  • David Moenning
    , contributor
    Comments (609) | Send Message
     
    Author’s reply » "Never get too high or too low"... Words to live by in this business!!
    15 May 2014, 01:38 PM Reply Like
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