-- Posted Thursday, 24 May 2007 | Digg This Article
| Source: GoldSeek.com
Rick’s Picks
Thursday, May 24, 2007
“Phenomenally accurate forecasts”
The Wall Street Journal pulled out all the stops yesterday, hard-selling a bull market that we continue to view as an episode of mass hysteria. In the lead story, the Journal trotted out a Nobel laureate, no less, to say in so many words that this time it really is different. Could this renowned egghead be onto something? Quite possibly. We’re not inclined to argue the point right now, since, whatever the cause, stocks are undeniably moving higher, and dramatically so. The Nobelist is a man named Vernon Smith, and he is credited in the story with having the good sense to have let the dot-com boom pass him by. To hear him tell it, and there is no reason to doubt his tale, he wisely would not have touched a dot-com stock with a ten-foot pole back in 1999. This time, though, he really does think that things are different – so much so that he says he’s been buying the shares of small drug companies to hold for the long term.
Smith won the Nobel prize for designing role-playing games that helped economists determine how investors might act in the real world. He came away from these experiments convinced that if you gave investors enough money, they would eventually create an asset bubble. That’s what happened in 1998-2000, as we all know. But it was the bursting of that bubble that has left investors with a residual cautiousness that persists to this day, says Smith, and that is why today’s bubbles – in real estate, financial assets, or what have you – are less dangerous than the dot-com bubble from which we supposedly learned our lesson.
An Impolite Question
In a more churlish mood we might ask the professor a question that one hopes would cause him to squirm, to wit: “What about the $420 trillion worth of derivatives that are currently in play in an global economy that produces no more than about $60 trillion of actual goods and services?” But we’ll let that pass for now, since, as we have already conceded, stocks are moving bullishly and so the burden of proof falls properly on the bears.
So what are we personally going to do about it? Just this: Rick’s Picks is going to effect a small tactical shift that should make it easier for subscribers to rack up profits by going with the flow. Typically we like to short rally tops and buy correction lows, a strategy that has served us well over the years. But we won’t deny that it would have been easier all along to have made greater sums more quickly by moving with the bullish tide.
Easiest Trade
One reason that trades recommended each day in Rick’s Picks tend to go against the trend is that it is the simplest way to control very tightly for risk, especially when we employ strategies that have been formulated the night before, when there is no way to predict whether stocks will move up, down or sideways at the opening bell. We usually try to short E-Mini S&P rallies with stop-losses of a single point or less. We don’t do this because we are bearish, but because it permits an entry strategy that is relatively easy to execute. While it is no great trick to predict approximately where a rally in the S&P futures will make a tradable top, it is far more challenging to foresee exactly how they will get there. Remember, the more obvious an uptrend or downtrend, the more complex a stock or commodity’s evasive moves will become to prevent “everyone” from making money on what even a fool could see.
As a practical matter, going with the trend rather than against it will require more work and concentration in real time during market hours. But that’s what the Rick’s Picks chat room is for. With scores of Hidden Pivot seminar “grads” to spot the best opportunities, there is at times more analytical brainpower in the chat room, perhaps, than in the mainframe that is wired to Goldman Sachs’ trading desk. Drop by sometime and see for yourself. When the group is not spacing out on some penny-stock listed on the Vancouver Exchange, they are one formidable bunch.
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Information and commentary contained herein comes from sources believed to be reliable, but this cannot be guaranteed. Past performance should not be construed as an indicator of future results, so let the buyer beware. Rick's Picks does not provide investment advice to individuals, nor act as an investment advisor, nor individually advocate the purchase or sale of any security or investment. From time to time, its editor may hold positions in issues referred to in this service, and he may alter or augment them at any time. Investments recommended herein should be made only after consulting with your investment advisor, and only after reviewing the prospectus or financial statements of the company. Rick's Picks reserves the right to use e-mail endorsements and/or profit claims from its subscribers for marketing purposes. All names will be kept anonymous and only subscribers’ initials will be used unless express written permission has been granted to the contrary. All Contents © 2006, Rick Ackerman. All Rights Reserved. www.rickackerman.com
-- Posted Thursday, 24 May 2007 | Digg This Article | Source: GoldSeek.com
