Damn, Three Two Times

On Monday the S&P 500 closed above it’s 200 DMA so I was prepared to sell our current inverse ETF position which is the ProShares Ultra Short Dow 30 (DXD) on Tuesday near the close. Typically I wait for a second straight day, which would have been Tuesday, as a sort confirmation in the hopes of reducing the chance of getting whipsawed. As a reminder the goal with defensive action is avoiding the full brunt of down a lot should it happen, not every breach will result in down a lot so there will be times where a position is entered and then sold without the market having dropped a lot. My plan yesterday was to sell the DXD, if necessary which would have been of the SPX was above the 200 DMA, five minutes before the close. Any closer to 4:00 and I can’t be certain of getting the trade complete which would be a huge headache. For most of the last hour yesterday the SPX was a few tenths of a point above or a few tenths of a point below the 200 DMA which stockcharts.com had at 1113.93; it will be a little different today. Given how the market was trading, within a few tenths of a point either way, I decided about ten minutes to the close to not place any trade even if it ticked back over the 200 DMA. The thinking was if the market continues higher on Wednesday I can always sell it then as missing by one day would not be a crisis and if it goes lower then the chance...

More Lists

Yesterday was a day for blog lists. In addition to the investing essentials list I posted, Brett Arends post a list of investing cliches that he debunked and Tech Ticker re-ran a list of 23 stats that “prove” the middle class is “being systematically wiped out of existence in America.” Brett’s article was a little more useful so I’ll give that one a little more attention. Brett debunked ten truisms, as opposed to “myths” suggested in the title of the article. His number 2 was interesting to me; Stocks on average make you about 10% a year. He picked 10% apart pretty well but I think there is a more useful point to be made with this one. No matter what the real average annual return over some reasonably longer period of time the returns year by year will be very lumpy. In 2008 the S&P 500 was down 38% and in 2009 it was up 25%. That sort of one year to the next difference is probably a very rare thing but given the debunked assumption of the average being 9-10% per year take a look back at the number of years where it was that number plus or minus a couple of percent. It is a very rare thing. The point here is that over a normal bull market cycle (1995-1999 inclusive may not have been normal) most of the return will come from just one year or maybe a little but longer. Check a Trader’s Almanac to see for yourself. Another interesting one was “If you want to earn higher returns, you have to take more...

More Lists

Yesterday was a day for blog lists. In addition to the investing essentials list I posted, Brett Arends post a list of investing cliches that he debunked and Tech Ticker re-ran a list of 23 stats that “prove” the middle class is “being systematically wiped out of existence in America.” Brett’s article was a little more useful so I’ll give that one a little more attention. Brett debunked ten truisms, as opposed to “myths” suggested in the title of the article. His number 2 was interesting to me; Stocks on average make you about 10% a year. He picked 10% apart pretty well but I think there is a more useful point to be made with this one. No matter what the real average annual return over some reasonably longer period of time the returns year by year will be very lumpy. In 2008 the S&P 500 was down 38% and in 2009 it was up 25%. That sort of one year to the next difference is probably a very rare thing but given the debunked assumption of the average being 9-10% per year take a look back at the number of years where it was that number plus or minus a couple of percent. It is a very rare thing. The point here is that over a normal bull market cycle (1995-1999 inclusive may not have been normal) most of the return will come from just one year or maybe a little but longer. Check a Trader’s Almanac to see for yourself. Another interesting one was “If you want to earn higher returns, you have to take more...

Ten Essentials

This weekend I stumbled across a hiking term that I’d never heard before; the Ten Essentials. The Ten Essentials are a suggested list of what everyone who goes hiking should have with them just in case. The ten per Wikipedia; * Map* Compass* Sunglasses & Sunscreen* Extra Food & Water* Extra Clothes* Headlamp or Flashlight* First Aid Kit* Fire Starter* Matches* Knife There are other things suggested in the body of the Wikipedia article including a cellphone and duct tape. While I’ve never heard of the list I have used most of the things on it during recreational hikes or wildfires I’ve worked on. It might be worthwhile to make an essential ten for investing. I think of this as a mix of investment products and strategies to help endure the vagaries of market cyclicality. This post is not a personal finance essential ten which would probably not even be ten; save more, live below your means and don’t use credit cards unless you are doing so for points or cash back and pay them off each month but feel free to comment with personal finance essentials. Ten Essentials of Investing (or maybe it should be portfolio construction) in no particular order; * Trader’s Almanac which is more about learning some market history to help have an understanding how the market works. Many of the market’s reactions are not that different from previous events even if the details causing the reactions are different. * Trigger point for defensive action to protect assets. I use a simple breach of the 200 DMA for the SPX but there are several others...

Ten Essentials

This weekend I stumbled across a hiking term that I’d never heard before; the Ten Essentials. The Ten Essentials are a suggested list of what everyone who goes hiking should have with them just in case. The ten per Wikipedia; * Map* Compass* Sunglasses & Sunscreen* Extra Food & Water* Extra Clothes* Headlamp or Flashlight* First Aid Kit* Fire Starter* Matches* Knife There are other things suggested in the body of the Wikipedia article including a cellphone and duct tape. While I’ve never heard of the list I have used most of the things on it during recreational hikes or wildfires I’ve worked on. It might be worthwhile to make an essential ten for investing. I think of this as a mix of investment products and strategies to help endure the vagaries of market cyclicality. This post is not a personal finance essential ten which would probably not even be ten; save more, live below your means and don’t use credit cards unless you are doing so for points or cash back and pay them off each month but feel free to comment with personal finance essentials. Ten Essentials of Investing (or maybe it should be portfolio construction) in no particular order; * Trader’s Almanac which is more about learning some market history to help have an understanding how the market works. Many of the market’s reactions are not that different from previous events even if the details causing the reactions are different. * Trigger point for defensive action to protect assets. I use a simple breach of the 200 DMA for the SPX but there are several others...