March 15, 2006

The Markets have spoken -FOR NOW!

Last week I wrote about the mixed signals - Fedex at a new high (strength) despite high oil and metal prices and rising rates (Usually Bad).

I said a big trade was coming, just could not predict. If I was a betting man, I would have said DOWN. Today we are closing at 4 plus year highs on most stock indexes. The move was up. That is why I do not gamble or read charts anymore. You zig when you should zag.

My good friends Eric and Cole have a smart strategy that they built into a hedge fund called Blackstar. Full disclosure - my hedge fund has some money with them. The strategy calls for buying stocks as they CLOSE at ALL-TIME highs with a simple and effective money management overlay. If you want to own strength, global strength, which makes sense in ANY portfolio, why not buy the strongest stocks (price) - ALL OF THEM. When you have a percentage of your portfolio in the strongest (price) stocks, all the time, you do not have to gamble and time the market. It is a great diversifier in that your broker and your own human nature hand you a portfolio of losers over time that you HOPE will bounce back.

Despite the fact that I love this allocation idea, I still like to talk and write about the markets. After all, I am still OFF! After I wrote the Fedex piece, the market started telegraphing the up move the last few days. As I posted, I bought a bunch of gold and oil stocks and nibbled at GOOG, NVT, RIMM. RIMM is up 6 and GOOG up 10 since I posted, it was up 17 at one point. I hope that you made a little money.

The added money supply and reflation works its way into the market in the form of higher stock prices. It is a dangerous trade-off as it will eventually get pulled and will get ugly. It is something the Fed has pulled off nicely the last 4 years though for those that have been in the trade to the long side.

RIMM is setting up as the real big winner of a renewed tech run. One thing I know for sure, it will be a volatile one.

I don't trade daily anymore and I am thankful to Eric and Cole, and countless others, and most importantly all the mistakes I have made that helped me realize that active trading was a waste of time. Catching a good trend is not necessarily easier, but something I have a knack and passion for and hope to continue to write about.

Some old faves hitting highs today include fedex, RIMM, AKAM, and Chipotles. Nuance (speech and voice recognition), a stocks and area of software I own had a nice write-up in Investors Business Daily yesterday as well.

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