Investment Philosophy

Investment style: I'm a part time bull, part time bear and full time profiteer.  I'm not much into modern portfolio theory, having been a stockbroker for a while and seeing people really get hurt from it.  I think asset allocation models are somewhat outdated especially since the market has moved from an investment vehicle (pre 1990s) to more of a trading platform.  I believe market timing does work although picking the very top and very bottom is impossible.  There is an extraordinary bias to be "long" the market and people sitting through a downturn to maybe dollar cost average it really does not make sense to me.

Why ETFs: I like them because they are specialized, trade throughout the day (unlike mutual funds) and some offer a little beta (leverage) to enhance returns.  There is also a entire list of bearish ETFs that lets you get short the market without having to create a margin balance and pay interest to your broker dealer like when you short stocks. They are also not "covered" by analysts who may or may not have a vested interest in their performance.

Why technical analysis: First and foremost it is unbiased.  I do not have to worry about someone in the industry coming out with an opinion, one of the reasons I mentioned for ETFs.  Second it actually incorporates fundamental analysis.  Since pricing represents the overall sentiment of the market, it takes into account everything that is known about the market including earnings expectations, economic and monetary polices and reports.  What technical analysis does not necessarily give you is price targets.  Some people who are much smarter than me will disagree.  But I view market moves like being on a ladder in a fog.  You can see the rung immediately above you or below you and those you feel secure about.  When you reach that step then you analyze where next to go.  

How my rating system works: I have devised a simple red-yellow-green light system to monitor my thoughts on the market and their corresponding investments.  For the markets: Red means a bear market.  Yellow means a market that is in the process of changing directions or is in a trading range.  Green means a bull market.  For investments: Red means I am net short positions.  If I had long positions they should have been sold and am adding bearish positions.   Yellow means I am not adding positions and may be adding option protection depending on market conditions. Green means I am adding long equity positions.

No comments:

Post a Comment