Question from a reader:”What is working for you in terms of investing in this market, Kim?”
My answer is that you should be flexible, not locked into one type of investment approach, do your own due diligence and research since I am not a financial advisor. That being said, what has been working for me is being a contrarian in this particular market at this particular time. For how much longer this will work and especially after this is published, who knows, but I give it to you freely because there is no magic about it. It is common sense and you know from my approach in writing profitable and practical books that if you start trying to chase pie and the sky things you might as well be rolling dice or playing cards. That reminds me that maybe my next book should be on wagering since so many people are looking for quick fixes and I need to remind them to keep their feet on the ground while their heads are in the heavens.
So what is my contrarian investing a go go approach (I have to throw in a little disco, right?). When I start reading on the Internet, listening to the talking three quarter bodies on the business news cable channels and reading the papers, If there is a lemmings mentality (lemmings, by the way, are the Northern rodents that have population booms and then disperse along the way and have been attributed in myth to following each other off of cliffs in mass suicide. There was also a cool video game named Lemmings that I played on multiple platforms including the Amiga back in the dinosaur days of computing), I research the stock or fund that is being touted and I do the opposite of it.
My theory is similar to other investors of the contrarian cloth in this particular market. We aren’t out of the woods yet and when everybody is saying how great things are or how wonderful a stock is they aren’t looking at the reality of the situation. The wheel of income needs the American consumer to get back to buying 2/3 of things made – we are the uber-consumers and with people still being laid off there isn’t much of a chance that happening at least for a financial quarter or two and maybe even longer. Even if a stock is blue chip, golden hued and iron clad, if the investing public gets skittish about the future, the money will flow away from the stocks no matter how highly they are touted.
I also don’t like so much touting because it screams to me that it is pump and dump time. I have also noticed with minimal supporting evidence that highly touted stocks drop when you would think they should go up after all the hubris and discussion with them. Go figure unless you start to think that people are selling off their shares or trying to short the thing.
In this economic time, the key things to watch for are change and real earnings. If companies are earning real cash and not just “losing less money” as so many are, they can be candidates for investing. They can also be candidates for avoiding or if you feel you need to short something but I really caution that you can get slammed if some bit of market news comes out that the public over-reacts to.
Look at the trend of the stock for the last few years as well if you can and see if there is anything cyclical about the business. For example, income tax preparation stocks should be peaking now with earnings coming out after tax season and then they should drop until maybe Winter and then they should start going up again in Spring when it is tax time. At least that is the theory and again, reality may be washing against the rocks of the river of commerce and taking your stock with it these days if you aren’t careful.
I also like to look at volume of shares being sold now because it indicates whether there is any kind of momentum going on, somebody (an institution maybe) is dumping shares or even loading up.
Even with all this research it can still be just an educated guess especially if some news comes out, a natural disaster or medical finding that can affect the stock. It won’t help a fast food company in the short term if there is a bad beef scare or if medical findings reveal eating french fries causes you to grow an extra nose on your arm, though that might be an interesting mutation to have I suppose. You can honk your nose on your elbow or something like that.
Note that my suggestions are for short term plays, for this particular market and you still need to take the time and look at what information is coming out that may be editorial fluff and sift that through fact and downright horse sense.
Good luck and let me know how things are working out. Have a great day and here is to a wonderful July gang!
July 1, 2009
I am opening up my practice to take on new tax clients. If you are interested in having somebody who is a successful businessman and tax professional with integrity review your returns discretely and see if your tax guy or gal is doing a good or goofy job, please drop me an email or post a comment with your contact information and time.
If you are looking for a day job, part time work, suggestions for saving money or investing, please check out my book, Practical Money Making, that is listed right after his paragraph in this very post. There are some great suggestions and ways to survive the Depression we are in.
Interested in any of my books? You may want to make a stop over here. Please click through to purchase my books and some other interesting items that actually ARE on sale.
Have you read my book, “Bad Tax Idea, Good Tax Idea“? Please order it today. The tips inside can save you hundreds if not thousands of dollars! Tax planning should be done year round and not just two weeks into January or later.
Part of all the proceeds from the sales of that book go to Rett Syndrome research. One girl is born with Rett Syndrome worldwide every fifteen minutes. My daughter Arianna has Rett Syndrome and we are working to do all we can to make her life easier and find a cure in her lifetime. Boys born with the Rett gene generally die at birth.
Kim Isaac Greenblatt
Contrarian Investing A Go Go
