- Losses due to quick trades and short sells
Losses due to quick trades and short selling is acceptable when you're required to get the highest return possible in the shortest amount of time with money that does not belong to you. However, keep in mind that you're not investing but speculating.
- Percentage change of investment portfolio matters more than dollar change
When working in the professional investing arena the only real measure of performance is the amount of percentage change to the entire portfolio, including cash, and not the dollar amount of change.
- Dealing with a rally within a Bear Market
We're currently experiencing a bear market. As with previous bear market rallies ( 1906-1924, 1929-1933, 1966-1982) they are violent and fast. Bear market rallies tend to get a lot of participants who end up losing any money that they didn't already lose on the first, second or third wave down. Be ready to take advantage of the rally but also be ready to jump out as soon as possible.
- What's the deal with Citigroup (C) and Bank of America (BAC)
To deal with the reality of a bear market rally we need to adapt to the changes taking place. First, even though nothing has materially changed with Citigroup or Bank of America we should be going long (buying) both stocks and using as much leverage as possible. The next upside target for Citigroup is $4.21 while Bank of America is $7.39. Hold these positions unless or until the stocks fall below the $1.02 level for Citigroup or the $3.14 level for BAC. If you're not comfortable with losing money then stay away from these stocks. Other speculative stocks to consider are MS, GS, HIG, GE, HBC, PAY, WFC.
- My rational for speculating in Helmerich and Payne (HP)
The rational for my stock purchase of HP is that the company has fallen from the high of $77 and has consistently bounced above the $20 level since 2005. If the stock falls below $18 then I will consider selling the stock. However, I have already accounted for the possibility of the price declining to the $8 level. Successful investing requires that you prepare your mind to losing all that you invest. If you make money then you have a problem that most investors would like to have to figure out how to deal with.
- What happens when the Dow Theory indicators are divergent? What indicators do you use to gauge where the market or economy is going?
When the Dow Transports and Dow Industrials are not going in the same direction then there is the problem of determining what the trend is according to Dow Theory. In circumstances such as these the best thing to do is assume that if the prior trend is down then it is still going to go down until proven otherwise. If the trend was previously going up then it is safest to assume that the trend is still up until proven otherwise.
The next question is, "are there other ways to determine the health of the stock market and economy?" Please visit my blog and look at the indicators on the right hand column. What I have posted is probably 1 out of 100,000 ways to view the markets health and direction. The ones that I have are ones that I feel are reasonable indicators of the general direction of the market but their certainly not foolproof. Only time and more experience will tell if these indicators are of any practical value.
- Dealing with investor psychology
All stock market investing is dealing with investor psychology. For this reason it is helpful to read books that deal with behavioral finance, game theory, Dow theory, market history or stock market psychology. While these topics don't answer the question of which stocks to buy what they do give is insight as to what people are likely to do under conditions of a rising or falling market.
- Investing in stocks is a 50/50 proposition, dividends from a quality stock tips the scales in your favor to 51/49.
Because there is always the prospect that the stock market will either go up or down you have one of the rare opportunities to enter into a 50/50 transaction. Unlike buying a home for investment, you won't have to fix the plumbing, deal with bad tenants, insure against loss or worry about earthquakes. Unlike starting your own business you don't have worry about the location, the foot traffic, zoning laws, or marketing. The purpose of researching and buying stocks that have increased their dividend every year a minimum of 10 years in a row is so that you can have the income from the stock even if the price declines. Remember, don't worry about the yield of the stock being low like Helmerich and Payne's (HP) 0.90%. Instead, focus on the fact that their earnings could fall 90% and still be able to increase the dividend.
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