“To be yourself in a world that is constantly trying to make you something else is the greatest accomplishment.” - Ralph Waldo Emerson
Good Morning Stakeholders and welcome to the beginning of the Holiday Year-End trading. One thing to expect for certain, with the typical lack of volume; the action will be very whippy and somewhat schizophrenic. In the November 28th ‘Jo’ we exemplified how the institutional money managers will drive the uncertainty of the tape for the last month of the year in attempt of job security and paychecks. This opinion has not altered.
Given last week’s negative downturn – inclusive with Tuesday’s bearish engulfing – the tone and direction remains down; especially for the NDX higher beta stocks. In evaluating this index you can plainly see the continued gap-ridden and massively broadened standard deviation range (typical vs. triple). It’s truly remarkable, since the new cyclical bear market began in August, what has become the daily norm for volatility. What used to take months or weeks to transpire, now takes days or even hours.
For investors (not traders) this has added a greater metric to money management as it has more so become a process of hedging, not just investing, strategies. For instance, our team now spends at least ½ of our daily portfolio management meetings discussing when to utilize and when to relinquish said hedge strategies. Previously this was done weekly. Conversely, with the increase in volatility, it has – and will continue to – separate the men from the boys (forgive the idiom). Once this year is completed, those who sought alpha with no regard to beta will not only be identified, but most likely shown the door.
This industry, as sad as this may sound and with total fault of its own, is ridden with annual superstars who are soon left in the food line because of no concern for the simple risk/reward metric. Four weeks ago we received an email telling us how absurd our opinion was when we illustrated a continual bearish stance at the end of October – based on our technical risk/reward analysis. This comment has remained taped, like an enemy flag upon a war map, to the top of my desktop to continually remind us of why we are paid to do what we do – preserve capital in times of uncertainty.
After 20-years there are a few simple things I’ve learned…
· Do your own analysis
· Don’t follow the heard
· Ignore emotion
· Sell Greed and Buy Fear
· And know in your soul it’s the right thing to do
If, as an investor, you can consistently maintain these five metrics, the rest is simple.
Happy Holidays to All!!!!!
TAM-KAT