Your answers so far
Wow, we are getting some fascinating, enlightening and sometimes funny feedback in regards to my earlier questions abut how much faith you have in the Wall Street system.
Here’s some of what you’ve said so far. Send in your feedback soon as I’ll be sharing the insights from you guys with our entire TradingWithCody.com community.
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Hi Cody,
I’m a new subscriber to TradingWithCody.com. You’ve asked some important questions. My thoughts are below.
How much faith do you have in the system of stocks, trading and investing on Wall Street do you have?
I have faith that times change, human nature doesn’t. By nature, we overreact to current events. If in 2004-5 you had asked, “How much faith do you have in real estate as an investment?” The reply would have been absolutely, it’s a great investment because everyone was speculating in real estate and making money. In 2009 you would have received a much different answer to the question. Current events lead us to doubt the stability of the financial system. This too shall pass.
How much faith do you have that the endless “Debt Crises” from the financial sector and/or Europe will magically fix itself with quantitative easing and bond buy backs and so on and so forth?
I have faith studying the past can give clues to the future. The experience of three prior debt deleveraging periods, two in the U.S. and one in Japan indicate regardless of the actions taken by monetary and fiscal authorities, the world’s developed economies are likely to endure a period of historically slow economic growth and low interest rates for at least another decade. Regarding stock prices, this predicts a long term sideways market. There will be bull and bear periods within the long term sideways trend. There will also be companies who innovate and prosper, and others who decline. But don’t expect a secular bull market to emerge any time soon.
How much faith do you have that you aren’t being screwed on every trade you do by high-speed frequency trading computers that are front-running your every order and glitches in the system like that of Facebook’s first trading day and/or yesterday’s intraday trading snafus?
I have faith that every time I make a trade I pay a “vig” in addition to commissions. Whether it be slippage or algo front running I will always pay more as a retail trader/investor. Always has been and always will be.
So why invest or trade stocks?
I have learned from experience if I buy leading stocks and am patient with winners, I can earn an attractive return provided I strictly adhere to the following rules:
Never forget that once I perform my research and select a stock to buy, only price pays. Therefore I always set a maximum % loss I am willing to take, and close losing positions when they hit my maximum allowable loss. I never add to a losing position (dollar cost average down). If I adhere to these rules, I protect my capital. Owning a diversified portfolio will not save me in a serious bear market. I would rather get shaken out of positions prematurely than take a large % loss. I can always rebuy when the market shows strength.
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Cody, it appears that in this environment, that is so effected by “the European Crisis,” fundamentals just don’t matter and haven’t mattered in a year. How can we as individual traders ever compete with computer trading? The equity markets react so quickly and so dramatically to global news. Cyclical vs secular – does that really work anymore? On the other hand, there are a select few stocks out there that are keeping some of us afloat, like KO and AAPL. We look to you for guidance in helping us select those gems.
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How much faith do you have in the system of stocks, trading and investing on Wall Street?
I have faith people will still be trading 100 years from now. I have faith people will be trying to game the system.
Do you believe that it’s only a matter of time before the money that you think you have in your E-Trade, Schwab, Morgan Stanley, Merrill Lynch, Goldman Sachs, etc stock account is plundered like those of MF Global and Peregrine?
Since 2007, those of us that have futures and margin accounts all worry about rehypothecation. A firm may go belly up during an “economic event” 🙂
How much faith do you have that the price of oil, gold and most every other commodity and derivative product on the planet aren’t manipulated and rigged on a daily basis like that of LIBOR?
We have every faith it’s all manipulated. Buy in Asia, sell in New York 🙂 Optomistic crop reports, dark pools, high frequency trading, GATA…
How much faith do you have that your deposits at Wells Fargo, Bank of America or JP Morgan are really going to be there when you go to pull out every last dollar?We have faith the FDIC doesn’t have enough to cover an “economic event”. But we have faith that someone will be there to hand us the money. Even if it won’t purchase much.
How much faith do you have that the endless “debt crises” from the financial sector and/or Europe will magically fix itself with quantitative easing and bond buy backs and so on and so forth?
None whatsoever.
Wall Street….lots of double talk, back room deals, corruption, price fixing, price manipulation, inaccurate information, crystal ball decisionmaking. Need I say more! I’ll take real estate any day!
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Is Wall Street any more crooked than it’s ever been? Probably not.
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I’ve accumulated cash and few times thought about getting a bank locker and stash some cash. (cash is better than keeping money in the bank with negative interest rate) Manipulation at every level and ZERO accountability. NO faith in the financial sector at all.
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If we had little trust, etc, one would never be on this site chatting, investing, exchanging ideas, trusting you and your work. We wouldn’t be here on TradingWithCody.com.
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Lets see…everything now is book entry…no stock certificates, no bond certificates, not even EE bonds are in paper form anymore. When the lights go out, like they did in India a few days ago, what will we have to trade with one another? Or when the computerized traders crash the whole financial system, the ones with the gold, the land, and the physical commodities will rule the world!
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Wall Street….lots of double talk, back room deals, corruption, price fixing, price manipulation, inaccurate information, crystal ball decisionmaking. Need I say more! I’ll take real estate any day!
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Pump and Dump…… it describes our economy now… and with it our relationships… we need a revolution.
