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Saturday, June 25, 2016

Elaboration on Plans, Thoughts on News and Hysteria

In retrospect, the amount of information that was posted in the past entry was what I believe to be insufficient; I think that explicitly saying some of the concepts that I believe in and my action plan regarding the Brexit is necessary. Pardon the relative incompleteness of the last post; it was getting late and I had work to turn in the next day.

So let's get back to the subject at hand. The decision from the voting populace of the United Kingdom to leave the European Union, or the Brexit, however tacky that name may be, is making headlines and causing a large amount of worry in the markets, causing a 610 point, or 3.4%, drop in the DJIA.  In financial news websites, like Yahoo Finance for example, article headlines are riddled with the term. People are writing about how the Brexit will affect the economy, how Trump's policies will affect the Brexit, how the global markets have "tumbled", how it has affected Obama, Mexico, etc. 

At some point I was expecting these writers to talk about how their pets' livelihoods would be in jeopardy.

In an investing forum that I frequented when I first started getting into investing, there was a post with a list of suicide hotlines and their respective hotlines. Another post is titled, "Brexit is happening. Time to panic."

It really can't be denied; these people are sounding like drama queens. They have no backbone. It's not the end of the world. Take a walk. Before I posted yesterday's entry, I thought that I had over-dramatized the event, but little did I know what would happen on the internet the next day: Sensationalist articles with an undertone of hysteria.

I mentioned above that there was a 3.4% drop in the DJIA of 610 points, which came to fruition right as the opening bell rang for the trading day. Now, that may seem crazy, but one should remember that the effects of yesterday still only puts us at down merely 2% for the week and 3% for the month. Now, I am not saying that this is it, and that the market has nowhere further to drop due to this event, but now is not the time to panic. One should never panic, ever. If someone is already getting seriously scared and wetting themselves over today's drop, that speaks miles about whether or not he or she should actually be involved with the markets in the first place.

A second thing I want to touch on is that one should look at these news articles and headlines with serious scrutiny and never take the the things they say and implications they make at face value. There are multiple reasons for this.
  • Reported news is old news. By the time you are reading it, the implications that have been made (if they are based on legitimate reasoning and facts) have already been priced into the market. You are too late. You cannot win against these giant firms whose main goal is to process vast volumes of information in milliseconds and act on them in an even shorter time.
  • If there's one thing I have learned from my experience with financial news and analysis, or even just my entirety of political and academic experiences, it's that an overwhelming majority if not all issues and topics can be debated feasibly on both sides with facts to back them up. There is a virtually infinite amount of information on the internet alone. Nothing can be deemed a certainty.
  • There is also a huge conflict of interest between news corporations and the investor. The former wants views, clicks, ratings, or people to read their papers. The latter for the most part just wants to know how they will make money, how they might lose money, and if their investment is at risk. So what do the news outlets do? Sensationalism! They do not care if you act in the best interest of yourself and your portfolio, or better suited to after reading their posts and updates.
The third topic at hand is related to portfolio management.

I am a contrarian, and I especially enjoy the idea of growth at a reasonable price. Therefore, when the market goes down, when stocks have a bad day, someone with my outlook would be very ecstatic as that means stocks are cheaper. That's why I was sounding somewhat positive in the next post. Crises like 2008-2009 and 2000-2001 have always been fantastic buying opportunities in retrospect. Just wanted to clear that out of the way. This core concept has worked out for me many times before. If you would like to understand more of it, I highly recommend "The Intelligent Investor" by Ben Graham - one of the best.

I've been hearing about how people are dumping their shares, how people are looking to clear their holdings completely. They are trying to time the market. They anticipate that the market will continue to drop, and they are looking to buy back in at a lower price at some point in the future. Trying to time the market like this due to fear will never yield desirable results - it will more likely than not drag someone into the routine of buying high and selling low. It is a fool's game. No one knows what the market will look like in the future for sure. Nada. 

Now for this Brexit, I think it would be fair to say that it is pretty significant. This is a country with international exposure being planned to rewrite its relationship and stance in the global economy. But the degree to which it will impact the market can and will never be feasibly predicted accurately in advance. While following it, I strongly believed that in the end, they would vote to remain. My decision to maintain the allocation of my portfolio to my positions reflects my implied bet. But still, I don't believe that things will really get that bad with regards to the end result on this issue.

So here's my game plan. I am still holding my positions; I do not plan on selling them anytime soon. I believe in the long term prospects of my major holdings, and I would not have invested in them in the first place if I haven't. I'm not interested in trying to time the market - I'm sure I will hear stories of people who successfully will and do, but in my experience as well as conceptually I stand firm in my belief that it never works out consistently.

If things get bad, they will get better. One of the most palpable tells of if things are at their worst is if there is "blood on the streets". And honestly, I have been taken aback by the sheer amount of fear I saw online today. The F&G index dropped 24 points. 

When comparing this event to 2008, the biggest difference is that when the events began to unfold back then is that a vast majority of people were still claiming that the "economy was still strong fundamentally" and that there is "nothing to worry about". For me, today it has been the complete opposite. People left and right are saying that our world is about to end. And I've seen this pattern before; I've seen people repeat this exact same sentiment over recent events such as Greece's bailouts, the Chinese shadow-banking "crisis", and in response to various well-known pundits predicting collapse. None of their predictions came to fruition.

That's it - for what I mainly wanted to cover.

In addition, I have found out recently that a lot more of my classmates and friends than I originally thought know about this site; I'm thinking of writing a general misconceptions post for them. 

There are a lot of things they believe or think that I want to correct. 

Friday, June 24, 2016

Brexit Short Update

OThis will be a short post. What just happened is pretty groundbreaking - political and economic relations between the UK and EU will be drastically changed in the time to come. I anticipate considerable short-term volatility and turmoil in global markets, centered in the UK.

I am a contrarian. Depending on how bad things really get, and to what extent the market will take this news negatively, but at the very least I know they will, I may consider this a buying opportunity. It can already be evidenced by the 9% drop in GBP/USD in the past 6 hours. Nikkei also dropped 7%.  I may be looking to initiate a position in a FTSE-tracking ETF, or possibly scope out some overly-battered companies in the future. Positions haven't changed yet.

People, money, and products from UK corporations will now have a harder time moving around. Money flow through UK banks are going to be no exception, and that is especially significant given that currently 63% of UK exports are attributed to EU membership. Immigration policies will be rewritten. Too many things are now planned to change to feasibly list.

It is important to stay level-headed. Times of turmoil will end up being opportunities in retrospect. I am actually very excited and intrigued; this is a significant event, and the bounds of its repercussions are yet to be realized. But who knows? Maybe it won't really even be as big of a deal as many would think.

Monday, June 6, 2016


To begin with, before anything else, wow. Almost at 21,000 views. Pretty crazy. And trust me, those clicks definitely weren't all me. Thanks. I'm looking through my past posts and boy, some of them are really cringey. Still pretty interesting to read though. It actually is serving one of its main purposes as a trading journal where I can review successes and errors quite well, so I've got that going for me.

I've also got the fact that school ended quite a while ago, which is nice as now I will finally have some more time to dedicate towards finance. I'm really looking to really begin putting a lot more time in it, by writing more articles on Seeking Alpha at a much faster rate than during the school year, as well as seriously scrutinizing my personal portfolio for the coming months. Who knows? Although my current positions in ETFs have done pretty well for me so far, I might be motivated to liquidate them and make open more available funds for some short-term swings based on technicals for a short period of time, as mentioned before. However, I definitely am not in any hurry to dump them. Currently, I don't see any irrational exuberance floating around regarding the market, and the technicals regarding the S&P 500 (one of my main positions) don't show any sign of a short-term period of being overbought.

(click to enlarge)

In fact, analysis suggests that it's currently testing resistance and might even break out of 210. The market has been in a stagnant channel throughout this past year and hasn't moved over 4% over the past year or YTD, so this could be its time for that. There's also a possibility that there's a bullish inverse head and shoulders pattern with ~Dec 14 and ~May 9 as the shoulders, and ~Feb 8 as the head. I am highly skeptical of that happening, as a similar bullish pattern happened in the past (it's included in the chart) and nothing came of that. 

These chart patterns always for me are speculative observations in which a concrete strategy should be employed with clearly defined entry, cutoff, and exit points. But given that I am already in this position, with a longer holding period in mind, I'm not really paying attention to that. 

As evidenced by the performance of the SP500 and DJIA over the past year and YTD, it's not been a blowout bull-fest this year like in the past few. But still, performance has been positive. I anticipate will not be too easy for me to find what I believe are true deals on growth stocks or havens that have been beaten down by an over pessimistic market. My positions in these ETFs are a pretty conservative (and easy) way for me to get significant diversification and relatively okay results. Currently up 8.43% on SPY, and 4.75% on XLP. Not amazing, but I wanted to play this first part of 2016 pretty close to the chest.

(click to enlarge)

SKX after the post-earnings pop sunk down a bit, but over the past week and a half recuperated a significant amount of those gains. No relevant technical analysis can be found here. It's relatively stagnant, a horizontal price channel is forming, RSI is near middle-ground, and although there was a recent bullish MACD crossover, I don't think that will amount to much.

Although in their earnings statement they beat their projections for the past recent quarter, they also project slightly lower sales for the next. Mixed sentiment has come as a result but overall their overseas business is expanding and doing well.

Still pretty optimistic about this holding. Current valuation makes the company seem like an old horse with no more strength to run, but I think they still have quite a bit of room and conviction to grow within the US athleticasual market as well as the international shoe and athleticasual apparel market, and get rid of their general stigma of being untrendy.

Managerial effectiveness ratios are sufficient, the financial statements of the company shows a positive trend with on average just under 40% YOY EPS growth rate, and projections are still showing to be growing quickly. For me, that just doesn't show signs of deserving a mere 17.99x P/E, a 12.55x Forward P/E, and a 0.9x PEG ratio (taken from finviz on 6/6/16). My outlook is still mid-to-long-term here, and I really think over time people will see this company as a strong growth prospect. Currently sitting on an 8.1% gain on it. I don't plan on shaving off the position anytime soon.

Overall, I've been really enjoying the past week and a half of summer. It feels good to eat actual food, be lazy, and spend time with friends I normally don't have the time to see. But that's pretty unsustainable. I can't just spend my entire summer doing nothing and being blissfully bored.

I've got quite a bit of plans regarding finance for the coming times and this post for me is the gunshot to begin the race. Luckily, since I have two and a half months to work with, it's a marathon, not a sprint.

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