Stage 4 - 2011 to 2015 - Post Credit Crunch Recovery
‘Retirement’ and Learning to Fly. Experimenting and codifying an Approach.
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This Blog, the first of a Series, has had a pretty slow development from a simple observation about how many people I see/know go about their Investing to something far larger and much more involved - yet, at this stage of starting to type, I am not really convinced that it will coalesce into a coherent whole - I can see this one being abandoned at some point and me just publishing it anyway in whatever state it is in and Readers can make of it what they will !!
Thankfully since typing the above I have made a lot more progress on the full draft and there is a reasonable chance that it might turn out not too dire. In fact, it might actually be quite helpful for many Readers. I have noticed with regularity how even very highly experienced and successful and wealthy Investors I know seem to lack a final conviction / belief in their own ideas and often it just needs someone like me to say “yes, I like the look of that Stock and it is probably well worth buying” or to actually buy it myself, to get them to finally take the plunge and ‘Pull the Trigger’ to bring it into their Portfolio. In simple terms, some people need reassurance despite knowing what to do.
After doing my ‘Scores on the Doors’ Blog for 2017 and seeing all the excellent Results that people have achieved on Twitter, it seems timely for me to bash out this Blog and try to put some context around the Returns that have been made and how we should best regard them in relation to our own achievements.
Boiled down to its smelly chicken bones, my contention is that we need to be dead careful when comparing our own Results with those achieved by others - on the positive side they can inspire us to do better but on the negative side they can give us some pretty disheartening and deflating impressions that are probably false and unrealistic. Yes, to a large extent this is maybe yet another Psychology Blog…….
I’m really fortunate (and it could be viewed by Readers who enjoy my scribblings as fortunate - although much less so for those who detest them) that some off the wall ideas for Blogs just seem to spring into my mind from time to time and I have got in a good habit of somehow recording the ideas so my ‘Slate’ is pretty lengthy and full of stuff that is challenging (and therefore enticing) to write and I like to pretend it is often of a nature that cannot be found anywhere else.
I think this idea came to me a few days ago and it is late at night on the Friday 2 Days before Xmas that I come to be working on the initial Blog Draft and I was trying to find something that was reasonably easy to produce (I am defo in Seasonal Holiday Mood and really can’t be arsed to work on anything too difficult that entails much research etc. - this is simply off the top of my bonce which is the easy and fast way to write.) The basic essence of my thinking here is that when it comes to the Financial Services Industry in all its various incarnations and nooks and crannies, a very simple and ultimately valuable stance for Retail Punters is to take the view that all Advertising and Marketing material is a potential danger to your wealth and that you need to have your Brain turned up to ‘Full Scepticism’.
There is a bit of common Folklore that goes along the lines that the moves of a Share Price can indicate what is going on within a Business and that this should be a major factor in our Buy, Sell or Hold Decisions. I guess it is an extension of the Efficient Market Hypothesis (EMH) which is more of a Macro concept whereby Economists make the claim that a Share Price, Asset Price or Index Level is merely the Market reflecting all known information about a Share or Economy or whatever and it purports the idea that “The Market is always right”.
Or is it? Well, perhaps there is some validity here but overall I would say the EMH is utter garbage - it is perhaps a wonderful Academic Exercise (and regular Readers will be aware most likely of how much I see little use for such Trash and I only respect such Theories if I have seen them to be true in my immersed experience of Markets over many years) but in truth it probably would only apply to a ‘Perfect’ Market where all Information available at a Point in Time is known to all the Participants in that Market and they react rationally and with 100% accuracy in an instant. I guess the flaws here are rather obvious apart from the simple fact that in The Real World (ah, the WD strapline !!) there is no such thing as a Perfect Market. It is a theoretical construct to help explain how Economies and Markets work but it is of little value to us as Investors (or Traders).
Last Week turned out to be a bit of a pain for me - from Monday to Wednesday nothing much seemed to happen and then things tailed off at the end of the Week so my Portfolio took a hit of 1.2% over everything (excluding my Income Portfolio which I rarely look at). This continues my angst at failing to see my Portfolio Breakout of its All Time High which was put in back in May and I feel like much of the Year has achieved very little !!
However, as always we need to stay calm about such situations and focus on the positives and what has really been achieved - even if the Numbers are not reflecting it yet. There was an excellent TED Talk (Rory Sutherland - ’Perspective is everything’) which my mate Tom Tomsky @calvoreon sent me on Twitter which was about Psychological Framing and Perspective - the basic essence being that how we experience things that happen in our Lives etc. and how we let them affect our Emotions/Decisions, is largely down to how we set the context of whatever has happened. I am not explaining this very well, so rather than me jibbering on, check out the Talk yourself here - it is 18 minutes long and actually quite funny: https://www.youtube.com/watch?v=iueVZJVEmEs First off I am having a very good year despite the flat recent Months - this is something that obviously I should celebrate and not get too down about. In addition, I have a nice collection of Stocks and I expect to see nice upside from the majority (or at least decent Dividends) in the Months ahead - and as we will see below, several of my Stocks are in very interesting Technical Situations where they are on the verge of All Time High Breakouts (don’t switch off already, I am going to do a proper explanation of this !!).
My mate Steve kindly offered some thoughts on Gambling as a supplementary activity to messing about with Stocks via an email and he very kindly agreed to the text being used for a Guest Blog because I am sure many Readers will find this useful. I have had to slightly edit it to protect the innocent but it is well worth reading - particularly because it makes some excellent points about the risks and how Steve in effect ‘compartmentalises’ his Gambling and Investing activities.
Thanks Steve !! WD.
I am sure many Readers will recognise the sentiment of “missing the Boat” and I regularly see this comment and I am also often asked “How can I justify buying a Stock which is hitting at New All Time Highs?”
In general I think this is a big challenge for New Investors in particular but I also know a lot of experienced Peeps who won’t buy something which is up at New Highs. This might be a Cognitive Error - correction, it definitely is a Cognitive Error !! For me there are 2 aspects to this puzzle. The first one is that if a Stock is making New All Time Highs (and therefore pushing into ‘Blue Sky Territory’ with no obvious Resistance Levels where Sellers will naturally come in) then it clearly has MOMENTUM. I deliberately have used Caps Lock there because we should all know by now that Stocks which possess Upwards Momo are something we should be looking out for and trying to buy; and on the flipside we really must be avoiding Stocks with Downwards Momentum.
The idea for this blog came about on Friday 1st September after a recent new IPO, Ramsdens Holdings RFX, came out with a very positive Trading Update and said “we expect our interim and full year profit before tax to be significantly ahead of market expectations.”
RFX operates Pawn Broker shops but also has a Retail Jewellery bit, Gold Dealing and also they do Foreign Exchange which sort of differentiates them from other Pawn Broker Stocks like H&T HAT. Anyway, as mostly is the case, the Trading Update came out at 7am but by around 9.30am I was reading on Tweets that a couple of Analysts/Brokers had already upgraded their Earnings Per Share (EPS) Forecasts to something like 16p in 2 years time. To be honest, the actual EPS Numbers are not the relevant point here - what struck me was just how fast this was to produce new Forecasts.
If you have not already read Parts 1 and 2 of this Blog Series (or if your Goldfish Brain needs to swim around the Bowl again……) then you can read them at these links:
http://wheeliedealer.weebly.com/blog/maybe-were-not-in-control-after-all-part-1-of-3 http://wheeliedealer.weebly.com/blog/maybe-were-not-in-control-after-all-part-2-of-3 Dopamine hit We often hear about ‘Dopamine’ but chances are we don’t really appreciate the mechanism around this inside our Brains. The TV Programme went into this and explained about how when we have an enjoyable experience and get excitement and pleasure, we get a hit of the chemical Dopamine as a natural response. I think the Dopamine gives the pleasure and makes us feel happy and it is the Brain’s way developed over eons by evolution to encourage Human’s to behave in certain ways and to follow certain pre-programmed behaviours. Obviously it is in the interest of the Human Species for individual Humans to want to have babies so the Dopamine is provided when we do activities which lead to this outcome !! (calm down you lot). |
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