CNBC: The Market's Latest Victim - "Buy and Hold"

Following up on a quote from one of the articles from [Weekend Reading]

In New York Magazine: Stock Surfing the Tsunami (i.e. the life of a daytrader in this crazy market)

The percentage of traders like Milman is small, but it’s not just day traders who are approaching the market with a short time-horizon these days. Investment bankers and hedge-fund managers who might have once based their trades on extensive research and elaborate models are finding that their models don’t work in this chaotic environment. Some who otherwise would have shunned this kind of day-trading are finding it profitable to chase the minute-by-minute momentum. “It’s definitely not a buy-and-hold market,” says one investment banker. “This is a trader’s market.”

I've written on this topic many times; even before we entered this era the past 18 months I've been noticing how there is such a focus on short term results and "gaming earnings" or "gaming the Fed" or "gaming everything" - I thought much of it was due to the avalanche of hedge fund money (that was levered) since in their world monthly results mean everything. HAL9000s in the quant funds [Aug 6: Cramer - Quants and their Machines] rolling over 1000s of trades while fighting each other (and humans) are another reason I think it's gotten to this point. Why so many pile into a stock ahead of earnings and then punish a stock to the tune of 30%+ if it misses by 1 cent for a 90 day period is beyond me; but the short term gambling mentality has grown more by the year in the 2000s.

Now of course we even have what I called "interventionist" risk layered on top of the normal risks from total lack of clarity in the economy and our financial system i.e. the risk the government will swoop in and do something that causes people to react en masse, destroying formerly profitable position. As traditional "signals" that people with experience rely on become useless [I'm Old School] we're all just stuck playing red or black in the Grand Casino. I will say up to 10 days ago there was a 6-7 week period where I've never seen technical analysis work to such perfection... when you don't have fundamentals you can trust in, I am guessing more people will rely on technical analysis. "TA" is a very self reinforcing discipline - the more people who use it, the more it works.

CNBC follows up with this story...

• As traditional market signposts lose their relevance, so does the traditional "buy-and-hold" strategy that investors have followed for decades. Market pros in increasing numbers are eschewing the usual investing strategies and watching technical levels as their guides for making money. They examine temporary market tops and bottoms as guidelines when to sell and buy, and are in many cases utilizing funds rather than individual stocks to make their plays.
• Earnings and economic data have proven unreliable to gauge the long-term prospects for the market, which has become a trader's battlefield. Money that once stayed put for three to five years can now get moved in three to five days or sooner.
• "What's happening is people have learned that if you don't take a profit it goes away," says Kathy Boyle, president of Chapin Hill Advisors in New York. "Even somebody who's really biased towards buy-and-hold is giving up."
• "The idea of saying valuations are historically low so we're just going to buy and hold, that comes at great peril over the next year or two," says Lee Schultheis, founder and chief investment strategist at AIP Funds in Harrison, N.Y. "But also being overly bearish might also come at peril if the government's able to get ahead of the curve on the liquidity-credit issue.
  
• But those with a traditional investors' horizon of 18 months and beyond are following suit, moving through positions in a way that would be discouraged in a normal market."
• With all of the obstacles facing the market, regaining investor confidence will be critical before buy-and-hold positions become popular again. "You need that confidence, that psychology to be restored," Schultheis says. "We need to know government's ahead of the curve, that they're not playing whack-a-mole, that we can now act and spend in a more normal fashion because we have a more reasonable expectation of what we see coming down the road. Then and only then will there be an opportunity for a sustained advance in equities."

If interested a funny story about the "shoot shoot shoot" gambling mentality that has overtaken the markets i.e. The Casino via UK Telegraph here.

• I don't normally manage to lose money quite so quickly. Nearly three weeks ago, markets were picking up strongly. The shares rising fastest were the ones that had previously been hit hardest but it was difficult to buy such shares in quantity.
• The sharp fall in Enterprise Inns shares reflects the mentality of the market. One minute we are in panic mode and it feels that almost any company could go bust. Then, as the panic subsides, people look for bargains.