Showing posts from May, 2010

Market Psychology

Market Psychology

A couple weeks ago my long time friend gave me $100,000 to invest/manage for him in the stock market. Despite semi-persistent questioning as to why I hadn’t purchased anything during the first week, as I did not like market conditions I kept his position 90% cash. As the market has had a substantial pullback since then, I crowed to him this morning via text, asking him if he was thankful beyond all recognition that I had kept his money out of these dicey, shark infested waters.
“Yes, thank you for not losing me money like everyone else has,” came the response, “I am getting creamed personally,” he stated, “I got into the market March 10th of this year. Why not March 10th last year?!!”
I briefly considered and replied that there was a very simple psychological explanation for this, that applies not only him, but most of the human race. As you, the reader, are likely also human, I thought the explanation might apply to you as well.
Last March 10th the market was at its…

Market Volatilty and the Use Of Value Limit Orders

Okay, so unless you live on the streets, of Calcutta India, on the planet Nabloon, you probably know how the market tanked today, and was at one point off in excess of ten percent, in what has to be one of the most volatile days in the history of the market.
Sadly, I did not sell most of my stocks as I had an inkling to do last week, but honestly, was too whimpy to pull the trigger. The ones I didn’t sell lost money with the rest of the market. I did pull a little off the table, but not much. Kind of like having $1,000 at a poker game where you suspect cheating going on, so you take $75 off the table and say, well, you ain’t stealing this, and then continue to play the rest in a game where the odds aren’t in your favor.
NEVERTHELESS, I DID DO VERY WELL TODAY compared to everyone else because of some very active trading. I don’t know how much of this is luck, and how much of this is skill, but I will tell you, I have been consistently good at doing this sort of thing over the last coup…

Buy British Petroleum

British Petroleum (ticker symbol: BP) has had 20 billion dollars shaved off its market cap since the gulf oil spill. They face huge financial obligations and law suits, but let’s say they end up paying out 10 billion total to cover legal claims, that’s way off 20 billion that got lopped off their market cap. You can argue what you wish morally, but there is VALUE here.
It’s like Rosthchild said, “Buy when there is blood in the streets.”

BP also pays a hefty dividend, in excess of 6% of the current share price.

In a related note, I believe we are going to have inflation here in the US. I see prices going up everywhere, NOT down. Oil has risen well off its lows, and is currently trading over $80 a barrel. I went to one of my favorite restaurants recently and noted the price of my favorite omelet had risen to $12.95 from $9.95 a couple years ago. “Well, we have to pay more now for the eggs and everything else. Sorry, not much we can do,” explained the waitress I had known for years.