Be Patient

I think it is a mistake to extrapolate from the past two Summers and predict that we will see the same type of decline again this Summer. Hedge funds as a group went completely "risk off" the past two Summers and by doing so ruined their years. It is difficult for me to imagine them repeating the same behavior that cost them dearly.

I believe there is something to seasonality and that it is not a coincidence that the Winter months have been stronger than the Summer months. This has been going on for decades. While I am not expecting the type of weakness we saw the past two Summers I believe we will see heavy bouts of negativity from time to time. Whereas it was necessary to pounce on any decline for the first few months of this year I believe it will be important to practice patience this Summer. There should be plenty of oversold readings and I don't plan on chasing moves.

2 comments:

dadzers said...

first let me say i have the greatest respect for you and your insights as a trader, but i have a question that has been bothering me for quite a while about your philosophy of trading.... it is obvious that you use fundamental analysis to decide WHAT individual stock to buy, yet it appears WHEN  you buy and sell, you use technical indicators that apply to the market on the whole, rather than specific for your stock or even sector of stocks... i guess what i'm asking is why don't you either trade a broader based basket of stocks so that you are not subject to the vagaries of some  british CEO's view of how his company should be managed , or apply your technical analysis to your individual issues for timing purposes...

Tsachy Mishal said...

The two strategies are complementary. A value strategy has good long term returns but the short term is lumpy. The trading strategy helps smooth out the value strategy and allows me to remain patient with my value names.