December 6, 2004
Hello,
Don’t bet the ranch, that’s what the NASD says, the pro’s scale into stock positions over time using the power of dollar cost averaging. Just waiting for the Santa Clause rally, despite the lack of performance of the indexes the market internals continues to trend to the positive. There was a three year period at the end of the 1990’s were indexes out performed ,but now it seems we are back to a more traditional stock pickers market ,were certain stocks and certain sectors significantly out perform. It is very important to use this holiday season to position your self for next year. Year end activities: remember you only pay taxes on realized gains. In theory your account should be up yet you should have realized losses. This time of the year it is a good idea to clean house and sell your losers, especially if you have taken some gains during the year. However I have often found that putting off taking a stock gain for the sole purposes of avoiding taxes leads to folly and perhaps disaster; ask anyone who didn’t sell in December 1999.
One day Sigmund Freud was smoking a very large cigar while lecturing on oral fixation, when questioned by a student on his stogie Dr. Freud responded,” sometimes a cigar is just a cigar”. The reason I bring this up is with the market moving up and down from day to day with all the economic data there is a tendency of some “experts” to assign specific market moves to trivial events of the day .Folks sometimes a cigar is just a cigar meaning, the ebbs and flow of the day to day market moves may have no correlation to the day to day news events what so ever. Even if there is a correlation, correlations in the stock market tend come and go.
This brings us to one more year end pearl of wisdom, “even a broken clock is right twice a day”. With all the reporters, pundits and pollsters seemingly endless speculations on the fate of humanity, state of the economy and laments of moral decline of mankind it is important to keep in mind that no one ever questions them on any inaccurate predictions. The pollster Zogby has even gone as far as to say that his polls were right and it was our vote that was wrong. Why do I bring this up ,well first on wall street no one ever got fired for being to bearish: bearishness protects capital even if it does not make any. Secondly what makes these guys experts anyway after all they are almost always wrong? And finally there is a tendency to see in the numbers and charts what ever you want it to be; if you want oil prices to be higher because your making money of the price raise ,everything you see tells you oil prices will be higher. This gets back to my point ,pundits promote there own self interest not yours ,they can like a broken clock and be accidentally right from time to time, but that does not mean you should not look at what ever they say with great suspicion.
James
www.jamesfoytlin.com
http://www.corporategrowthconcepts.com/
http://onesmallvoice.blogspot.com/
http://www.ridgewoodrepublicanclub.com/index.html
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