After the first week of trading in 2012, I was pretty ecstatic.
I don’t really recall the details anymore, but I was way ahead of the S&P for those first few trading days, but had I just matched the overall market’s performance I would have been happy, as the year was getting off to a good start.for everyone other than the Godless short sellers.
As the prayerful believers intone during the Passover Seder, “Daienu” – it would have been sufficient, as God is thanked for each successive miracle that he bought to a fleeing people in the desert. One such miracle would have been enough, but two? Three?
There’s nothing like a series of miracles to chase a bad case of the blues.
For what it was worth, I was also hearing the fruits of my laborious efforts on air at CNBC as the crew of “Street Signs” was continually referring to their new word of the year, “Eurosis,” which coincidentally enough I had submitted in response to their request for viewer submissions.
It was going to be a very good year. Miraculously so? Probably not, but as Szelhamos would say “Good enough.”
Money and ego. How can you go wrong with that combination? The former feeds the latter and then if you can independently build the latter as well, all is good, as long as the ego doesn’t give you a false sense of invincibility.
Then along came Ben Bernanke.
Lest you think otherwise, I’m a fan of the Federal Reserve’s Chairman. As opposed to Alan Greenspan whose legacy after long tenure is now being re-interpreted, Bernanke may be the real deal and have legs to withstand the scrutiny of the next generation.
The man not only has ice water running through those veins, but he also has an interchange named after him off I-95 in South Carolina. In itself, the latter isn’t necessarily a huge achievement, but for two factors.
The first being that he’s still alive, although the ice water dampens the overt display of emotion, perhaps making the assessment tricky. For all I know, the bureaucrats in the Dixie flying state capital may think he’s already passed beyond St. Peter’s gates.
The second, and by no means least, is that together with Hyman Rubin, my guess is that those are the only two in that state that have anything in governmental concrete named after individuals of Jewish heritage.
Alive and Jewish. That probably presented a problem for St. Peter.
Where Bernanke enters this most recent story is that following his last two appearances and comments, the price of precious metals has soared, as he made clear that interest rates were going to stay depressed for at least another two years.
That made my holdings in the inversely related silver ETF reverse their course pretty significantly.
Personally, I didn’t sense the same feeling of urgency, but apparently the rest of the world did and the price movements could not have been coincidental both times.
Ordinarily, I wouldn’t mind that because I would have had the shares hedged by virtue of having sold call options. The premiums for those options provided a pretty comfortable cushion for all of the volatility that had to be endured.
Unfortunately, those shares have through time become a significant component of my portfolio and you may have guessed that most of that current holding wasn’t hedged for February’s cycle.
Boom and Boom for Bernanke. Damn interchange. Rumble strips are probably made of horns.
But despite that Bernanke induced flight to metals, I didn’t fare too poorly following the first 5 weeks.
Looking back, I came to realize that I would have fared much better if only I had a case of “the blews.”
Not the kind that the soulful likes of B.B. King sing about.
What I needed was the ability to be “blind to the news.”
That should have been the CNBC word of the year, or at least the past few weeks.
During periods of rational activity, bad news leads to pessimistic feelings, which leads to stock selling. Even more, bad guidance leads to greater pessimism and increased need to get out of an investment.
Building inventories? Reduced subscriptions? Expiring patents? COmpetition? Bad,bad and bad.
But how else can you explain upward price spikes in Green Mountain Coffee Roasters and Netflix?
Of course, investors had “the blews.”
I list only those twostocks, but there are more.
Ordinarily, as a holder of shares in both of those, I’d be happy when shares move up, especially in a big way.
Especially when the news is anything but good.
I say ordinarily, because as usual my shares were hedged. Although I really don’t mind losing shares to assignement, in fact, you have to accept that will happen or a regular basis, I also don’t mind if shares fall and remain in my hands.
Talk about how being “blind to the news” was a good thing the past few weeks. Imagine if a Bristish prostitute lent money to Jack the Ripper so that he could get his cutlery sharpened.
Despite the kind of news that, on a fundamental basis, would send investors into a selling state, instead investors have blindly bid up the prices that at any other time would have sent them into a death spiral.
In general, fear and greed are bad motivators in life.
They don’t serve you terribly well in investing either.
In the past I’ve also mentioned “FOMO.”
The fear of missing out.
That’s when you’re late to the party and you overcompensate for what you’ve already missed, hoping to make up for that by excess going forward.
There’s probaly a point early in the party where you don’t have that much to catch up and and it’s alright if you go in a bit more than you reasonably should.
But then there’s a point that it should be clear that the party is going to end.
That what makes curfews helpful. If you kniow when the curtain is coming down you can make a rational assessment as to whether you’re going to get enough value out of your excesses to cover the costs.
It’s like going to an amusement park late in the afternoon if you have to pay full admission. At some point, it’s just not worth it, unless somehow you’re ably to magnify and leverage your experiences beyond the cost.
In the stock market, there is no curfew.
Although there is leverage, that can only get you in trouble.
Come Monday morning, I’ll be faced with having to replace nearly 50% of my p[ortflio, as I wasn’t investing with a case of the blews.
I usually hope for a down Monday, especially following a triple digit gain Friday preceding.
Over the past 4 months, there hasn’t really been good reason to stay long over the weekend following one of those triple digit gain Fridays, as there hasn’t been a pattern of follow through.
That would be wonderful as I wouldn’t mind getting back into the party, but still don’t know at what price it pays to sit it out.
And then there’s “FOMO.”
Irrational behavior not only feeds on itself, but it becomes a contagion, as well.
“The blues” tends to overstate reality, especially the negative aspects.
“The blews” denies reality, especially the negative aspects.
“The blues” longs for better times and an escape from the abyss.
“The blews” creates better times and makes a penthouse out of the abyss.
I need me a case of the blews and I fear that I may be missing out.