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Stock market investors?

  1. Oct 25, 2007 #1

    chroot

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    We have a huge variety of very intelligent and talented people here, so I figure it's a good place to discuss to the stock market. It's an interesting time in the market right now, as it becomes more and more clear we're headed for a bear run in the near future.

    Anyone else here an active investor? What are your thoughts on the economy?

    - Warren
     
  2. jcsd
  3. Oct 25, 2007 #2
    stock market investing is a money making job, right?
     
  4. Oct 25, 2007 #3

    chroot

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    It can be a profession in its own right, but most people participate in it as amateurs, as a means of making secondary income.

    - Warren
     
  5. Oct 25, 2007 #4

    J77

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    If you've got the money to invest in the first place...
     
  6. Oct 25, 2007 #5
    My wife and were advised by Bear Stearns to buy, but Merrill Lynch said we should sell short and that's what we did. But the stock went up so we had to drop our shorts and go with Bear Stearns.
     
    Last edited: Oct 25, 2007
  7. Oct 25, 2007 #6

    Astronuc

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    One can certainly make money as an investor, as opposed to being a broker, but one has to do thorough research on the market, the particular sector, and the particular company.

    Back in '98, I told a friend to invest in NSC and CSX. During the following year, the share prices just about doubled. He decided to stay in the tech sector which had about doubled or tripled during the prior year or two. Then the bubble burst, and the NASDAQ and tech sector took a nose dive. He lost 70% of his investment, as opposed to doubling it.

    I've been in and out. I prefer less risky investments these days.

    There is a lot of volatility, and unfortunately, there are those who get access to information that most investors do not.

    The market and the economy is highly leveraged, and probably a significant amount of debt will not be repayed. Default rates on mortgages and other loans are at an all time high.

    Merrill Lynch just added $8 billion in writedown. Not a good sign.

    The NYSE and Dow rebounded yesterday on speculation of more action by the Fed. Also, not a good sign. There is more concern about recession than there was a month ago.

    And the Bush administration is still asking for $billions on a war that can't be won.
     
  8. Oct 25, 2007 #7

    turbo

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    I'm investing in funds (through a self-directed IRA) that hold a wide variety of domestic and/or international stocks. Some are more volatile than others, but they tend to correct for one another over time. The stock market has increased in value over time, so I tend to just hold tight during downturns.

    We certainly seem to be headed for a bear run, except in the energy market, where high oil prices due to ME instability will enable some serious price-gouging and record profits.
     
  9. Oct 25, 2007 #8

    Astronuc

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    Oil and gas leases/trusts are doing well. There are a few companies that specialize in those. The ROI can be quite substantial.
     
  10. Oct 25, 2007 #9

    chroot

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    IMO, there's no question we're in the beginning of a protracted bear run. The Dow transportation index rolled over with a convincing 50- and 200-day moving average "death cross" in mid-September. Those of you who subscribe to any portion of Dow theory know what that means -- fewer goods making it to customers means businesses upstream must be suffering.

    The SPX also came very close to its own death cross in early October, but has bounced up and drifted back down, making a very distinct bearish inverted cup-and-handle formation. I'm not really one to believe technical analysis in vacuo, but with all of the other associated signs (dollar value declining, housing market killing banks, oil at record highs), I'm pretty sure it's meaningful.

    The market has also been incredibly twitchy lately (just look at what has been happening to companies in relation to their earnings, good or bad), and IMO has only barely survived a couple of massive sell-offs in the past few weeks. The bulls are keeping the roof up with modest buying pressure, but they're getting tired.

    I've been short the financial sector since early October (when their volatility all simultaneously tightened) and have, well, so far made a killing on the short side.

    I'm not a financial advisor, and my advice is essentially worthless, but.... I would advise anyone who invests in mutual funds to stop investing in mutual funds. I would advise anyone who invests in long large-cap positions to stop investing in long large-cap positions. I would advise anyone who has a significant amount of money in a 401k to reallocate most of it to cash. (Your fund managers cannot short the market, and you're going to get beaten up pretty badly if we have another year of bearish times.)

    Good luck to all,

    - Warren
     
  11. Oct 25, 2007 #10

    chroot

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    By the way, the futures market is putting the chance of a 0.5% fed cut at 2%, but I'd personally put it at more like 50%. Be careful with any shorts into next week.

    - Warren
     
  12. Oct 25, 2007 #11

    EnumaElish

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    Healthcare.
     
  13. Oct 25, 2007 #12

    chroot

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    What about it?

    - Warren
     
  14. Oct 25, 2007 #13

    EnumaElish

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    I think as a sector of the economy it offers excellent long-term value.
     
  15. Oct 25, 2007 #14

    chroot

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    Is this just sentiment, or have you done some kind of valuation analysis?

    - Warren
     
  16. Oct 25, 2007 #15
    I put some money into KMGB and then after earnings it dropped like 40%. Now I am in the dog house big time. :(

    Stocks I watch every day are: ATI, TIE, NVDA, AAPL, GOOG, BIDU, RIMM, PTR, DRYS
     
    Last edited: Oct 25, 2007
  17. Oct 25, 2007 #16

    chroot

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    Ouch, Greg.. I'm sorry for your loss. Maybe it's about time we had a good thread going here. So you invested all your capital in one position, didn't use a stop, and are now stuck with a dog that don't hunt, eh? :frown:

    Don't take any offense, but I'd say you have a lot to learn about capital management, valuation, and... the use of stops. :frown:

    - Warren
     
  18. Oct 25, 2007 #17
    Yeah, but many times I'll see a stock bounce back. Who can predict a bottom? So it's hard for me to use stops and lock in a loss. Guess I'll have to wait it out and hopefully the stock will creep back up with the new few earnings reports.
     
  19. Oct 25, 2007 #18
    It's nice to see a little financial talk here, I don't feel so lonely now. If anyone is interested in doing some theory testing and are a bit weary of committing real money I use http://www.investopedia.com/. You can play with fake money and they have a lot of good investment and trading info on there. Market is heading for a major correction, but I have been feeling that for about 6 months now and it has yet to roll over like I thought it should have. And oil, I just can't see how the market keeps absorbing these major bumps in and not be trading lower. Does Q4 just look that good?
     
  20. Oct 25, 2007 #19

    chroot

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    Again, I hate to say it, but this is pretty much a textbook example of what not to do... Many people ignore the signs of a retreat, don't use stops, and end up riding a stock down until it's halved in value. Then, as selling pressure mounts and drives the stock to what they feel are shockingly low prices, they finally succumb to panic and sell quite near the bottom, right before it begins moving back up. All of the people who lost money in the dot-com bubble lost money because they made these kinds of decisions.

    You should never end up sitting on a non-performing asset. Ever. If you ever find yourself in a situation where you're "waiting out" a downturn, you have already made some serious mistakes. Unfortunately, once those mistakes have been made, you're screwed. There often is no good escape plan once you've lost a significant amount of your capital in one trade, so you should never permit that to happen. "Waiting it out" means you've effectively lost that capital for the duration of the wait, when it could have been making money somewhere else.

    Some basic rules:

    1) Never permit any single trade from losing 3% of your capital, or perhaps 5% if you are willing to accept greater risk exposure. Set stops when you buy the stock, and if the stop is executed, accept that you made a (small) mistake and move on. Putting in a properly-priced stop order is an instrumental and necessary component of customizing your risk exposure.

    2) Because you generally cannot permit more than 3% capital loss per trade, you almost necessarily need to be in multiple positions at once. (Otherwise your stops will be very tight and you'll probably get stopped out frequently.)

    3) Never take only one view of the market. Hedges are a critical part of mitigating risk. The reason mututal funds almost always underperform the market is because they are forced (via regulations and rules) to always take one view of the market.

    Again, sorry to hear about your loss, Greg. If your stock rebounds, get out of it and take a break. Don't get back in until you've read more and have a more detailed plan of action.

    - Warren
     
  21. Oct 25, 2007 #20
    Lets take AAPL as an example. End of July it peaked at 146. Mid August 117. Now two months later it's at 182. If I exit at 3%-5% and move on I would have lost on a huge opportunity.
     
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