Comments on Fund My Mutual Fund: Bookkeeping: Weekly Changes to Fund Positions Week...

Hi GuyI was exhausted last week myself, and was ha...

2008-03-24T12:54:00.000-04:00

Hi Guy

I was exhausted last week myself, and was happy to have the 3 day weekend to refresh. Many people I've read for years continue to say they are also drained and this is the hardest market they've ever dealt with since no trend lasts for more than a few days and so much outside interference in markets makes things impossible to game. The amount of meddling in this market is amazing and marks a changing point in history - but desperate times require desperate measures.

This is not an environment for anyone who believes in fundamentals - even Cramer says today about the agriculture names everyone is now a technical trader because fundamentals mean nothing now. So I imagine the level of frustration must be immense across institutional desks across America.

I truly think with the dominance of programmed algorithmic hedge fund computers who do 70% of trading now, they simply move off their math, in concert, and without any rhyme or reason, they will gladly change from 1 line of "reasoning" to another in the span of 1 session, full bore, without recourse - and then reverse the next if conditions in their algorithim dictate. With the leverage in the hedge fund community approaching (apparently?) 20:1, 30:1 these huge amounts of money move markets, and once something moves in one direction all the humans follow. But the reversals have been astounding - I've never seen anything like this and people with 30-40 years in the market say the same thing. And same for the 'sector rotation' which is simply breath taking to watch in how extreme they are. Nothing changes in the real world in any real economy or macro trend 20-30-40% in 2 days but stock prices do. It is really a sea change and I wonder if this is a function of the rampant confusion and trying to deal with a new era of outside invisible hand trying to push the market to "where it wants", or the beginning of a new era where this is "normal". I think it was masked in the past because I was saying to myself the past 2 years or so how astounded i was when things went up, how far past any reasonable value things went up, without any correction - that simply could be the same computer driven trading - but back then they just continued to ply the same trade daily week after week, month after month - whereas now they are being whipsawed. I think my takeaway is becoming after watching the last 3 years or so is we might be in a new era where moves will be much larger and more extreme, permanently due to this computer driven trading. So much money is placed in the same direction so when the trade works it goes much farther than you imagine, but when it reverses it is both immediate and dramatic.

Overall, right now I am reducing risk - both short and long positions can be decimated in an instant and with the Invisible Hand now showing their *ahem* hand so obviously I need to learn a new playbook. Need to adapt to this new paradigm, and will need to see how this market trades under the new rules for a while before figuring out how it will work "from now on".

Mark: I had this to say in my weekly commentary (w...

2008-03-24T11:20:00.000-04:00

Mark: I had this to say in my weekly commentary (www.thetechnicaltake.com): "It was a very draining and emotional week. If you invest in stock indices, you were reminded prudence doesn’t pay. In an increasing risky environment, the stock market was buoyed by Fed interventions. On the other hand, if you invest in commodities or commodity ETF’s, you were reminded that investing in financial assets can be a risky business. Gold had its worst one day drop in over 28 years in what seemingly was a news vacuum.

Ahh, so why is prudence a four letter word? Because being prudent doesn’t pay. Despite well defined increasing risks, investors believe that the Federal Reserve will continue to bail them out. Lower prices are seen as either one step closer to the bottom or another reason for Fed intervention. Therefore, lower prices are a reason to buy. Why be concerned with risk when you have a backstop to catch your misses?

For me, this isn’t about the moral hazard issue or even Fed bailouts, it is about acting responsibly (i.e., with prudence) in a potentially hostile market environment. It is frustrating to “do the right thing” and not be rewarded for your actions.

I am not complaining, but let’s just recognize that this is the hand we have been dealt, so let’s deal with it."

EWT will do much better than EWM & EWS. EWT has so...

2008-03-23T16:07:00.000-04:00

EWT will do much better than EWM & EWS. EWT has some first class tech companies in the world, I know tech is out of favor at this time, but it seems to have better value.