understanding the psychology of behavior

I’ll be way from a computer to make active trades and Blog posts until next Tuesday. I placed some limit orders as per the posts below.

Should be an interesting week while I am away. My company is going through a round of serious layoffs, and the rumor is that they will be announced on Friday. The goal is to cut the middle management, and since I was recently promoted to a manager I may get layed off. Sweet. Its an interesting state of mind… I get promoted within an environment of industry consolidation, which is obviously a sense of pride. But I knew full well I could get layed off from this move.

See… I am too much of a coward to quit my job, cause the money and momentum are good, to just focus on trading and other interests. My company has treated me well for the almost 6years I have been there, but I have been itching to trade full time for a while now. I figure accepting the promotion would give me a sense of pride, and force the company to pull the trigger. (Suicide by cop… and the severance package would not hurt either.) I would rather get layed off from a job I do not feel strongly (when compared to trading and my other interests), versus my friends with children to feed and a mortgage. I can cover my expenses through trading. (The only thing prevent me from making more money trading is the ‘pot’ I am trading with.)

Happy Trading…

So I’m watching Kudlow and Company tonight, and Mr Kudlow is pounding the table on the thesis that we will be in a continued bull run thanks to the falling price of Oil. I agree with the idea, but where I do not agree is that he uses the decline of oil as a catalyst for gas prices to go down, which will allow money to go to mortgage payments… and ‘bam’… no more credit crunch.

I just disagree so much. More layoffs are still coming, mid/high $3 gas is still too high and the high quality mortgage paper is being hurt by people who can afford to pay them but choose not to. (Why would anyone pay a $500K mortgage when the value of the house is now $300K? They don’t, and default. Granted that rate of default is decreasing, which benefits the financials, but we are still in a ‘consumer washout’.)

The things we do best are the things we haven’t been taught.

-Marquis de Vauvenargues

(Courtesy of iGoogle’s Quote of the day )

1. Iran fake missle testing pic.

2. Concentrating Solar panels using dye instead of mirrors or lense. No data concerning efficiency was provided, but the concept is interesting.

From CNNMoney.com, “Gasoline Prices Slip Again“… then, when entering the article, it reads… “Nationwide average is down nearly a penny from all-time high”

Are they joking with that headline?!? Serious, I didn’t know CNNMoney wanted to be a news satire site.

Talk about coincidence… I posted my article at 12:05 questioning why mainstream media has not brought his insterest in the plan real attention. Then I noticed 5 minute later MarketWatch (12:10) posted this article, ‘Pickens not in it for the Money with his energy plan’.

I just thought it was interesting.  For the record… I’m sure he is not in it (his plan) for the money, as he already has a boat load of it.

Mr Boone’s oil plan is interesting, but benefits him completely.  His plan is basically centered around Nat. Gas and Wind.

1. The incease use of Nat Gas for automobiles would benefit CLNE (He is a major holder).

2. He is building the biggest wind farm in the nation in Texas.

Frankly I am surprised none of the media outlets have not questioned him on it.  But what he also fails to mention, or purposely leaves out, is the use of the Smart Grid and batteries.

The automotive world will see a transition, and it is obviously seeing it. The transition will  come with electric cars. There are batteries in play that can handle this, due to new developments in the battery space, and companies ready to take advantage. (article)

The energy use in this country is shifting.  We will primarily be using our own natural resouces and multiple alternative energies, and (IMO) transitioning from a carbon fuel base to a more electric fuel base society.  Over the years we should see a significant decline in our account deficit, and the dollar strengthen significantly from this transition. But the economic factors all depend on how quickly we transition our primary fuel base.  In order to transition, the Grid needs to be upgraded, and to be made more efficient to handle the extra electricity. No question it will be a long journey, how long depends on gov. incentives.

The tide has already shifted… its a matter of ‘how long’. (Exxon selling their entire retail unit, imo, is the biggest indicator of the transition.)

Over the past few weeks I noticed another steady increase in hits this blog is getting. Do not really know why because I do not actively promote it. My site gets distributed to various places, but has been for the past year or so, hence that should not be the reason. And SeekingAlpha, while I am a regular contributor does not really take anything from this blog anymore. (Not blaming them since I have tailored the blog to more trading instead of content producing biased articles.) Like last time, the only reason I can come up with is that you are telling others about it. And for that I am thankful… thanks… again. It tells me the content is speaking for itself.

Because of the increase I wanted to explain the blog…

Look around and you will see no ads. I do not care to have ads because I do not care to make money off the blog itself. I make money off of my trades. I consider my ‘trades’ posts the core of the blog. My trading calls, via a strong technical and fundamental analysis, are usually correct.

I have this blog simply because I love to trade. I love the markets, and the strategy utilized to beat the markets. I have no other avenue to vent my thoughts, so I created this blog a few years ago to get my thoughts out there. The blog also acts as a record keeper for me… documented proof… aka a diary.

One day I hope this blog will morph into my official Hedge Fund blog… that is, when I am able to start one, but until then, I’ll keep these type of bullsh*t posts to a minimum .

1. Those crazy greeks are on to something with their diet. The Mediterranean diet apparently can reduce the risk of cancer by 12%. (I can call them crazy because my heritage is that of the crazies )

2. A media source, outside the US, is saying things are slowly improving in Baghdad, which makes me believe it.

A recent article from Felix Salmon (I noticed via Seeking Alpha), and the comments that followed, made me realize a lot of people are far too ignorant on Technical Analysis (TA). TA can be anything, but it is more associated with reading charts or patterns as per proprietary mechanisms used to play a stock or the market.

Anyone reading this post, from my blog, obviously understands the importance of TA, simply because TA plays a huge role in the trades/investments I post here. A lot more often then not, the trades are winners, so arguing against my use of TA is a mute point.

Notice how I stated ‘MY USE of TA’. I do not state this because of arrogance. My use of TA may or may not be better than how someone else uses TA, but a surrounding principle of TA is how to understand it.

THERE ARE NO RULES OF THUMB with TA. None. Because of this, TA is very difficult to understand and many get burned with it. Many people do not know what indicator to use, and when to use the specific indicators. To make matters worse, TA is not time depended, but price dependent. (This is why some of the trades I post on here take a very short time period… once the target price is achieve, bounce!)

The above paragraph is a huge simplification of the logic needed to use TA. For instance, I read over 100 charts daily. Of these 100, approximately 40 are specific individual stocks I focus on. The rest are index/sector specific charts that give me a better sense of the macro economic back-drop. When I post my trades, I include some relevant TA indicator that sticks out, but the one indiator I mention is not the only thing I focus on. There are more behind the scene info I take into account. How the various information gets correlated is what makes TA very difficult.

Also, TA is not a means to say, stock XYZ will, with certainty rise or fall. It is a tool that allows an investor to reduce the risk of uncertainty, with only an increased probability of knowing if a stock (or the market) will rise or fall. And when we are dealing with markets, entering an investment with an increased probability of the next movement gives an investor a huge advantage.

Anyone who does not understand TA principles brushes it off to the side. Some of my friends in finance call me ‘lucky’. (Completely discounting my time and effort to be successful, and consistency of winning trades… quite insulting, really.) But I always respond…

“Luck is when preparation meets opportunity.”