As we head into December, most stock markets are having another good year. If most stock markets are having a good year you can imagine the wins in some individual names as it is a market of stocks.
I have lost a little touch with the new leaders because my old leaders are not doing too badly. I am looking at the Stocktwits50 and feeling underinvested.
While the temptation is to chase (that’s what funds will do if they have underperformed for 12-24 months), as a small investor you can still be patient.
I was looking at this old leader Dryships $DRYS in Investor’s Business Daily today and reminded that winners show themselves all the time and there are a winner or two or three on this week’s Stocktwits 50 that will double and triple from today’s price.
Stocks that rise 1,000 percent were up 400 percent on their way.
Every American can find these. We are living amongst them. You don’t need to read headlines or talk to experts to make this happen. It IS happening.
All true, but most individual investors still risk being left without a chair next time the music stops. In the last 10 years of this secular bear market, long-only, un-hedged investors got their heads handed to them by two massive cyclical bears: March 2000 — Oct 2002 and Oct 2007 — March 2009.
Hopefully, before the next cyclical bear market inevitably arrives, StockTwits will start offering tools to help investors hedge and add short exposure to balance out some of their long positions.
and in general the individual investor has left the U.S. stock market as nearly 300 billion in assets ( http://www.reuters.com/article/idUSTRE6AI28W20101119?loomia_ow=t0:s0:a49:g43:r3:c0.062500:b39662758:z0 ) have been removed from the U.S. equity markets in the last three years (beginning with 2008). I will own and trade at the margin, but with valuations this extended and QE II falsely balloning valuations, what is happening to muni markets will eventually hit the stock and bond markets also. One must hedge in this environment where savers are crushed and risk-takers are forced onto an often parabolic risk profile that cannot be held onto without downside protection.
Remember, no sustainable equity bull market has ever existed in about 130 years of U.S. market history until inflation adjusted P/E ratios hit the high SINGLE digits. The S&P 500 is currently around 22. Momo will work until momo doesn’t work ( and in 2000 it stopped working, worked again briefly from 2003 and early 2004, got stagnant in 2005, and worked again briefly in 2006-2007, sank again in 2008 to March 2009, and has been rescued most recently by QE 1 and QE II).
Because debt is so high and young people are unemployed, we risk having a completely risk averse generation coming unless sanity is restored to fiscal policy in the U.S.A. Stocktwits can help by showing individual investors how to trade and position for the shorter term, and hopefully it will also discuss the dynamics of being nimble with risk capital as well. It is a most difficult time to invest indeed, and people need to wake up from the slumber of “buy and hold”. This environment will punish most who buy and hold, not because they bought, but because they did not learn when not to hold.