terça-feira, 28 de outubro de 2008

2 of 10 Biggest Index Days Have Been this Month

2 of 10 Biggest Index Days Have Been this Month

Here is a list of the biggest % moves in history (DJIA) - note the years; they are all Great Depression years except 1987 which was obviously Black Monday (biggest one day drop in history). This "company" should say a lot about where we are as an economy. But as they say the greatest upward moves come in bear markets. That said, timing it is impossible. This was shaping up to be the worst month in history but maybe after today's move it won't be... at least on the indexes - the damage in many names on my watch lists are simply unfathomable over a 4-6 week period.

Top 10 Biggest Percent Moves

I will say today really stunk for us as we did not participate - since we are so heavy in cash and our short exposure ripped us up. Every tick up this afternoon I thought of a reader's comment last week who wrote "why don't you just stay in your Ultra Short positions?" Some of them were down 25-35% today, but of course everything is more simple to analyze in hindsight. Sitting in them until 3:59 PM yesterday would of been nice in hindsight but I truly thought that Oct 10th reversal, the huge rally that following Monday and then retest a few days later was "the bottom" as we were so historically oversold. But history has meant nothing this year. 

The irony of the stock market is timing. 1 week ago we entered Monday cautious but relatively bullish because of that "double bottom" I thought had formed the week before - I was not willing to go crazy on the long side but had 1/3rd cash with very little short exposure. That killed us last week as the market tanked and our 'safety stocks' (esp healthcare) were roiled. Now if I had that same exact exposure from last week (little short, good cash, and the rest long), this week we'd of participated nicely today. But our positioning today (substantial short, substantial cash, minimum long) was better suited to last week, not this week. But that's the bigger point here - this has become a day traders market - there is no investing here. The allocation of "long/short/cash" should not mean EVERYTHING - but that is all that matters now. Not the individual companies. Everything is a massive move to the up or down, by the minute or hour. That's not investing so until we get back to an investing environment it's simply hard to participate or put money into the market; it has become an unplayable market for anyone with a holding period even of "weeks" not to mention crazy time frames like "months" or dare I say it "quarters". Unfortunately that will drive out most investors and will leave the market to the gambling types - which I suppose is appropriate in a way. Even some of the more aggressive hedge funds have effectively "fled" with incredibly high cash positions. Because it's simply become a casino with no sense or advantage for anyone unless you hold positions for minutes or at most an hour or three.

We have become numb to 4% moves up or down - and intraday swings of 8-15% up and down within a day. It's now been a month since we've had more 1 up day in a row, and two months since we've had more than 2 up days in a row. The violence of the moves is awful and frankly the action in individual stocks, at least those of a "growth" nature that I follow, is far worse than the indices. It would be much healthier to put together some 1-2% type of up days in consecutive nature rather than 10% up, 7% down, 5% down, 6% down, 6% up, etc.

Frankly if someone said we have a two week rally ahead of us I would not even know which stocks to pick for that rally anymore, because who knows what will participate and what won't. Everything you've learned from 10-15 years has become a moot point and useless in this market. I assume the most beaten would rally the most but if you bought the most beaten anytime in the past 2 months you had a 90%+ chance of losing 15-30% within days if not hours. We are simply detached from any state that has a precedent and the action is so random. So for the most part I'll just stick with index ETFs if indeed any rally is born and make "directional bets" (see the short/long/cash discussion above) - but that's not a strong suit. If it is your strong suit congratulations because you have the market of your dreams - but for the other 98% of us, this is a foreign being. I've sat here the last three weeks reading earning reports every night and asking "why?" "none of it matters anymore". Whatever this market has become is not something I understand or have ever seen or suits someone who tries to pick stocks based on their business and valuations.

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