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Trade Alert – More than a feeling

October 21, 2013 by Cody Willard

So many people have come and gone 
Their faces fade as the years go by 
Yet I still recall as I wander on 
As clear as the sun in the summer sky 

It’s more than a feeling — Boston 

Ever heard the saying, “Don’t confuse a bull market for genius” around here? When stocks are in a bull market — or more specifically, when stocks are in a bubble-blowing-bull market — by definition, most stocks that you could have bought are “going up”. Unless you’re one of the many (former?) money managers who was caught short and/or in cash during this bubble blowing bull fest, you’ve almost certainly got some stocks that are up huge for you.

In my own portfolio, we’ve got Facebook, Google, Apple, Sandisk, First Solar, FutureFuel, Cree and several other names that are up huge for us and hitting yet new all-time highs again today. Should I feel like a genius? Or have I simply done a great job of getting in front of what is now clearly a bubble-blowing bull market? To be sure, as I noted above, I know plenty of professional money managers along with so many retail investors at home who have pretty much completely missed this bull market and the huge gains in so many stocks in this bull market. That doesn’t make those of us who have caught this huge move higher “Geniuses” though.

I’ve long advocated trying to buy the most revolutionary and fastest growing stocks you can find, but doing so in a framework in which we do actually try to game the economic and stock market cycles. You want to buy when the markets have crashed and the economic cycle looks terrible and you want to sell when stocks are up huge and the economic cycle looks great.  More specifically for this cycle, I have been saying that we are headed into this ongoing bubble blowing bull market for the past three years.

And most important, the question is — what’s the “smart” thing do now? I work everyday to try to stay on top of when this bubble blowing bull market part of the cycle is going to end, and it could be tomorrow. But I don’t think so. More likely, we will see the top of this stock market bubble when the Fed finally starts trying to fight it. First, you’ll hear the Fed start to worry about their policies potentially inflating some “asset bubbles” (starting to hear some of that lately, aren’t we? So, check). Then we’ll see the Fed actually start to reverse some of the radical QE, 0% loans for TBTF banks, and other bubble-blowing policies they’ve pushed for to create this ongoing stock market bubble. And then, we’ll probably want to really start to panic and get out when the cycle fully turns and the stock market will likely crash once again.

Remember the feeling of fear and how stupid you felt for buying stocks back when the markets weren’t already blowing bubbles bullishly? Do you have a feeling of euphoria and genius right now? The point of all of this is that no matter what happens to the bubbled stocks and bull market tomorrow of next year, you certainly know that the feelings you have right now are telling you something. The hardest trade to make is usually the right one for the very reason that your emotions about your own stock picking prowess or lack thereof is usually wrong.

So the upshot of all this is that I’m going to continue to trim down some of our biggest longs today. I am selling about 1/10th to 1/5th of each of the following stocks:

Facebook, Apple, First Solar, FutureFuel

You’re not a genius and neither am I. And next time you feel like an idiot remember how smart you felt in late 2013. How are you feeling right now? The answer is actually indeed, “More than a feeling”. Hoohah.

Boston – More Than A Feeling

 

 

Related posts:

Bear Market Length, The Great Codini Says, Companies That Become Verbs And More
Trade Alert: Latest positions and locking in some big profits
Trade Alert: Selling the IBB puts
Trade Alert: Panicky action, buying call options on two stocks
Trade Alert: A look back at 2013 (so far)
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Filed Under: Trade Alert

Disclosure: At the time of publication, the firm in which Willard is a partner and/or Mr. Willard had positions in some of the stocks mentioned above although positions can change at any time and without notice.

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This does not constitute an offer to sell, a solicitation of an offer to buy, or a recommendation of any security or cryptocurrency or token any other product or service by Cody Willard or any other third party. Furthermore, nothing in this is intended to provide tax, legal, or investment advice and nothing in this should be construed as a recommendation to buy, sell, or hold any investment or security or cryptocurrency or token or to engage in any investment strategy or transaction. You are solely responsible for determining whether any investment, investment strategy, security or related transaction is appropriate for you based on your personal investment objectives, financial circumstances and risk tolerance. You should consult your business advisor, attorney, or tax and accounting advisor regarding your specific business, legal or tax situation.

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