So, let’s review what an “old school” long equity investor/trader like me is up against in the stock markets of 2018, which absolutely includes more fearless traders and more fearless trading.
- Lightning fast, technically brilliant algorithm-based traders who can change/react to positions and things like the ^VIX faster than I can blink. They are fearless traders as speed, data, technical charts and mathematics are on their side. There is little to no human factor in their actions, excluding the creation of their equations, and their actions are already calculated and re-calculated and in place. They are ready, set, to go this upcoming week as I write this. They will also use Sunday's night incoming data from Asian markets (which open soon) in their calculations. They are fearless traders.
- Volatility traders who jump in with significant funds to higher risk ETF's/ETN's like (TVIX), (VXX), (UVXY), (VIXY), (SVXY), and are exceedingly connected with technical data to know when to pull out. These financial platforms are high beta/higher risk trades and from what I can tell are very day/weekly-trade oriented. Here again these fearless traders take on these trades and they make lots of money when my long stock positions are in free-fall.
- High frequency traders are also fearless traders who are globally more price movement knowledgeable on a 24/7 basis and can also react lightning fast with their algorithms to get the best pricing as markets move up or down. They do add liquidity to the market which is good, but they will usually achieve the best prices of the day and are usually prepared when downdrafts occur as the data comes to them super-fast. They too are fearless traders.
From my perspective there is clearly a more combative trading environment today. In the past I’ve always felt I was in more of a “Win-Win” situation as a stock trader, sometimes I would not win, but usually when a company’s earnings or projections were off. And, of course, I was impacted in 2008/2009 with the housing/banking crisis, and all other worldly events prior and subsequently. But I never felt that my investments would be undercut or even impacted by other trader’s action during non-event/low impact situations. That is no longer true today as the volatility, high-frequency, and algorithmic traders have just proven the week of February 5th, 2018. Collectively they can take down markets, destroy Billions of America’s wealth in less than 24 hours and do so with little to no concern to the consequences of their actions. The goal of course is that they can act so quickly that they can and will absolutely WIN the situation as it unfolds. However, everyone else loses in amounts that far exceeds their collective WIN. Clearly the trading goals for some now are to “WIN AT ALL COSTS” and as quickly as possible and everyone else including me is irrelevant and usually one or more steps behind anyway.
There are many quotes from one of my favorite books that perhaps deserves some consideration to the fearless traders of 2018. I happen to like this one.
From my standpoint volatility, high-frequency, and algorithmic traders can be collectively a Modern Prometheus, they are fearless and on Monday afternoon February 5th, 2018 they revealed their collective power over the market.
So, what are my next steps and what will my approach be going forward? I am a gardener, and one side of my garden I get full sun, the other side mostly shade. I can grow things very fast in the full sun side of my garden, on the full shade side it takes much longer to successfully grow in this part of my garden. Over time and with much care for both sides all parts of my garden grow. Slow and steady works just fine for my garden in the shade. And like a shade gardener that will be my approach going forward with my healthcare-oriented investment portfolio. That is of course, unless the collective wisdom of today’s fearless modern Prometheus’s instantaneously decide to take down my garden. Nevertheless, I remain steadfast in my beaten down healthcare focused stocks, which include (CELG), (ABBV), (NVS), (NVO), (GILD), (AMGN), (PFE), (JNJ), (AZN), (LLY), (MDT), (ABMD), (BMY), (MRK), (REGN), (BIIB), (ISRG), (ABT), (OTCQX:RHHBY)
I wrote this article on my own. I am not a financial adviser. I have no relationship with any of the healthcare companies I hold positions in. Good Luck to all trading in 2018.
Respectfully submitted to Seeking Alpha on 3/4/2018
Disclosure: I am/we are long JNJ, MRK, NVS, NVO, BMY, ABBV, GILD, AMGN, BIIB, ABMD, ISRG, ABT, PFE, MDT, AZN, LLY, RHHBY, REGN.