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Opinions : Stay greedy or take my gains ?User Forum Topic
Submitted by FormerSanDiegan on May 6, 2009 - 8:41am
Over the past 3 years I have been basing my investment strategy partially on the deflating asset bubble. My assumption was that the deflation triggered by the housing decline would result in destruction of capital and therefore a general decline in commodities. I am sensing that the time for this strategy may be ending. Below is an index I have composed to help me track the strategy. It is essentially based on the inverse of commodities I have selected to be important to my strategy. Based on this and the fact that the Fed, other central governments have the money printing presses going full bore I am thinking it is time to get out. Thoughts ? (Click on thumbnail to see full size)
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Sell half (50%) of your gain.
If the remaining half falls more than 20% from here, sell the remaining half. IF the remaining half appreciates 20% from here, sell half that half...
Repeat unit you sell everything.
Your instincts got you this far, why not trust them again? How many people here did what you did, and why trust their advice? Was it Buffet who said it's one thing to predict rain, it's another to build an ark?
Plus, what flu says makes a LOT of sense. Cash out a portion and realize your gains, and let some percentage you can afford to gamble with further ride for a while.
As time goes on, I'm starting to believe more and more in the double (triple ?) recession. We may be out of this one sooner than the bearish Pigg-types (me included) expect, but back into another one much faster than the mainstream believes possible.
With that said, this may be the time to get out, but look for another chance to get in.
I agree with sdduuuude. The treasury bubble is the next one to burst and its impact on the economy is much more profound. I think this site will be more valuable if we start to track the treasury bubble rather than the hidden inventory in Temecula. Just my thoughts.
flu - Good advice. One that would probably be good to incorporate generally into my short-term trading bucket of $.
sdduuuude - Would that be a backward N-shaped recovery ? I could see rate jumps in say late '09 or early 2010 that might trigger the scenario you describe.
carlsbadworker - I agree. I have been avoiding any kind of bond or bond funds and opting for short-term cash for the better part of the past 3 years. I missed out on a significant bond rally, but don't want to be holding the bag when rates start moving up again.
Good job FSD,
With that said, this may be the time to get out, but look for another chance to get in.
Good food for thought.I have been anticipating a fairly good possibility of just what you are talking about. This hypothetical near future recession could easily include another ,perhaps 90's size and style housing bust. Maybe it will be the day of reckoning for many true knife catchers and some percentage of loan mod recipients.Possible irony is that no one will help them if they are not a big threat to the economy, even though they helped manage the crash by being knife catchers and for buying time for the banks, in the case of loan mods.
FLU - call it the "middle of the 'W' recovery."
The gov is basically borrowing money to get out of debt and putting lipstick on lots of pigs (banks). In the short term, it fees up credit and makes for the appearance of a recovery, but we are still in deep doo-doo so the second hammer must fall eventually.
Also, it seems that the housing crash was really a bubble pop based on inflated asset prices. The effects of this have hit employment, but it seems the effects of reduced employment haven't hit the economy yet.
The slowness with which economies move is always amazing to me.
You should always have your exit strategy before any investment or trade. This stops you from getting into an emotional decision once in an investment.
Whatever your original exit strategy was should be followed, if you did not have one you should exit now and feel lucky that an investment that was spot on but had no exit plan made a gain.
I tell people who are learning to trade this all the time and it never sinks in until they get into this dilemma.
Forget your financial strategy - what people need is a spiritual strategy!
If the remaining half falls more than 20% from here, sell the remaining half. IF the remaining half appreciates 20% from here, sell half that half...
Repeat unit you sell everything.
^^^^^^^
Whatever your original exit strategy was should be followed, if you did not have one you should exit now and feel lucky that an investment that was spot on but had no exit plan made a gain.
I tell people who are learning to trade this all the time and it never sinks in until they get into this dilemma.
Good advice.
This is an multi-year (intermediate-term) approach, based on fundamentals. Not really a trade in days to months regime where you operate (rather successfully, I might add). So I consider this more of a Robert-Campbell or Rich Toscano-style style trend tracking.
My exit strategy is essentially to stick with my approach until the fundamentals and the market tell me to move on. We may be approaching that point so I think the easy money has been made. Probably time to move on.