| |
Q. and A. Why read this column?
at 2006-02-06 23:45:27
Educational use only. Never intended as advice.
Keywords: investment strategy, technical analysis, risk management, capital preservation, mean reversion
Investing. It’s not rocket science. Rocket science has a predictability based on principles of mathematics and physics. To an extent, investing does, too, in a pseudoscientific way. Market mavens proselytize overvaluation and undervaluation, but few (like Jeremy Grantham, Richard Russell, Mark Boucher, Jeffrey Saut and the like) have the breadth of experience and track record worth heeding. Grantham’s article in this week’s Barrons is a fine example.
Why read these columns? From time to time, the great Richard Russell of www.dowtheoryletters.com presents question and answer sessions (he generates the questions and the answers) to enlighten his readers about why he thinks the way he does. I’ll try the same, with apologies to Russell, whom I’d love to take to lunch someday.
Q. What are you selling?
A. Nothing. I have no sponsors and intentionally do not accept advertisements (yes, I’ve had offers). I do show a variety of ‘trading setups’ for informational purposes only. This site is purely educational.
Q. What are your investment biases?
A. I believe in the advantages of small cap value stocks, the importance of asset allocation, market timing using a confluence of indicators, and hedging your bets. I strongly believe in mean reversion to determine higher and lower risk opportunities. Ignoring the importance of market psychology and the reality of the day (“the price is right”) bring investors to ruin (“never let a trade become an investment.”) Of course, risk management in order to achieve capital preservation comes first.
Q. Do you have any core trading ideas?
A. Yes, I believe in trying to determine macro trends, and studying how to take advantage of them.
Q. Who are your investment ‘thought leaders’?
A. I’m an eclectic investor. I’ve mentioned several above. Tom DeMark inspires me, as do the guys at www.minyanville.com , particularly Todd Harrison and John Succo. I also think Louise Yamada, author of Market Magic has great ideas, as does Larry Connors who wrote Street Smarts with Linda Bradford Raschke, and Dave Landry (trend analysis) and Kevin Haggerty (volatility bands) of www.tradingmarkets.com Jim O’Shaughnessy, author of What Works on Wall Street has very powerful quantitative ideas. Stan Weinstein (Secrets for Profiting in Bull and Bear Markets) and Gary Kaltbaum (The Investor’s Edge) deserve attention. My son, Conor Sen, with economics and computer science background, has a depth of research and computer skills, coupled with innovative technical market ideas that make his opinions and mathematical constructs valuable to me. Conor cut his teeth on Boucher’s The Hedge Fund Edge and had the advantage of growing up during the recent bear market. Conor co-authored (did the research) How Markets Really Work with Larry Connors, and I wouldn’t be surprised to see Conor be the Richard Russell of short-term trading in the future. Really.
Q. What sources of information do you rely upon for trading?
A. I trade with Interactive Brokers, use Worden’s TC2000 for end-of-day data and screening, and Qcharts from www.lycos.com as my platform. I’m always willing to listen to other peoples ideas, and I wish I had more time (and monitors).
Q. Do you have any other core investment beliefs?
A. I’m sure that quantitative approaches have advantages, provided there is adequate risk control. O’Shaughnessy’s work, and the performance of his funds proved that. I also believe that Wall Street has its own interests above those of the average investor, so that individual investors ultimately bear responsibility. Even simple systems, such as go long the SP500 if it closes above the fifty day average and close out if it falls below for two days have greatly outperformed buy-and-hold.
Q. Are there particular areas that you believe will prosper going forward?
A. Geopolitical tensions, commodity-based reality, and the rise of Chindia (China and India) can’t be ignored. That means the importance of homeland security stocks, metals, energy, and water. I want to own them, but I want to buy ‘em when they’re on sale, not when they’re marked up.
Q. Do you have any other expectations for investors going forward?
A. I expect the balance of power between hedge funds and mutual funds to tilt toward hedge funds. Mutual funds are about relative performance, while hedge funds produce absolute performance. I also expect dramatic growth in exchange-traded funds over time. Blogging will gain in importance, and more blogs will become subscription-based, provided there is ‘value added’ content.
Q. Do you have any final comments?
A. Final, are you kidding me? I love to write. Seriously, our financial system has become dominated by manipulation, driven by debt-based growth, and we are ultimately at the mercy of our creditors. Buffett reminds us that “debt is a dagger aimed at the heart of a corporation” and the US has become the merchant of debt.
Good trading and great risk management.
Best,
Ron
Blog Source - http://ronsen.blogspot.com/atom.xml
|
| |
|
