Here are my recent favourites from from the wonderful Daily Speculations:
– In an entertaining piece posted today, Vic Niederhoffer explains recent market events in the context of the Night of the Living Dead. I applaud Vic’s relentless optimism. It’s a much needed antidote to the endless pessimism spewed forth by the doom-mongers and perpetuators of fear.
– In What I’ve Learned from Losses, Scott Brooks stresses the integral importance of losing:
One of the tenets of my life is that I want to be known as the guy with the most losses. I want to be the guy that lost the most. My reason for this is simple: the guy with the most losses is also the guy with the most victories.
I recommend reading the full entry.
– Steve Leslie finds an excellent quote by Vic Sperandeo (author of Methods of a Wall Street Master):
“The more the victim struggles the more the alligator gets. Imagine an alligator has you by the leg: it clamps your leg in its mouth and waits while you struggle. If you put one of your arms in the vicinity of its mouth while fighting to get your leg free, it lunges and then has your arm and leg in its clutches. The more you struggle, the more the alligator takes you in.
So if an alligator ever gets you by the leg, remember that your only chance to survive is to sacrifice the leg and drag yourself away. Translated to market terms, the principle is when you know you are wrong, close your position!”
Having been dragged down by the alligator several times in the past, I know I would do well to keep this in mind.
– Even though it sometimes feels like the world is against me, with my my stops being ruthlessly hunted down before the market turns in the other direction, I have to agree with Larry Williams:
I do not believe there is a night crew, specialists, floor traders, et al., going out after my stops or my positions.
I think that is a sophomoric concept. If you are getting stopped out a lot it simply means your stops are too close and market randomness is doing it to you — not some cabal that meets in secret prior to the opening every day.
– Bruno Ombreux writes an excellent piece about his efforts at timing the market and how calling the exact top and the exact bottom of a market isn’t a guarantee of success:
…my market timing allowed me to sell at all the intermediate tops in 1997, in 1998, and in March 2000. It allowed me to avoid the bulk of the bear market in 2000-2002. I came back too early in August 2002, sold in September, came back at the exact bottom in March 2003!
… It is incredible that even though I caught most major tops and bottoms in 10 years, I only over-performed by 2%
First, I caught all the actual tops, but also about 10 of them which never turned out to be tops. The market continued higher and I missed part of the move. Second, even when the top was an actual top and I was flat, it created the problem of knowing when to get back in, which in most cases occurred a bit too late. Third, buying and selling too much is created a lot of friction in the form of commissions.
Based on this I decided to be always 100% long. I am not timing the market, styles, or anything any longer. I still hope to continue beating the market by a couple percent a year from stock-picking (probably more beta than alpha). I don’t care if the results are more volatile. This is largely compensated by a huge decrease in workload and worry. Freed time can be dedicated to more useful pursuits, ….
– And lastly, James Tar provides an excellent quote by Roger Federer on losing as a fact of life:
“That’s not the way it is. A guy put me away when he had to. He played a perfect match in the end. He didn’t give me any more chances. He served well. He didn’t give me any unforced errors and I was just playing too poorly in the end to come back. So the right guy won today. That’s just a fact.”