The Deipnosophist

Where the science of investing becomes an art of living

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Location: Summerlin, Nevada, United States

A private investor for 20+ years, I manage private portfolios and write about investing. You can read my market musings on three different sites: 1) The Deipnosophist, dedicated to teaching the market's processes and mechanics; 2) Investment Poetry, a subscription site dedicated to real time investment recommendations; and 3) Seeking Alpha, a combination of the other two sites with a mix of reprints from this site and all-original content. See you here, there, or the other site!

11 January 2010

Investment opportunities occur in all types of market conditions

Futures prices at this moment (545am pst) indicate the markets will open higher, whereas the US$ trades lower.

This theme has become a mantra for me of late, largely because I seek (various) signals at inflection points. The 'carry trade' of the US$ -- long commodities and stocks / short the US$ -- has been a lock-step relationship for a long while now. It also is an obvious trend, which has me looking for its derailment.

The up trend since March has lacked volume -- especially diminished since early-November -- which creates possible and potential problems. I typically do not home in on daily price swings, but I do focus especially closely for a possible negative turn when it appears imminent. Perhaps paradoxically, while many stocks appear increasingly bearish, some stocks manifest bullish postures. Interestingly, many of the most bullish chart patterns are in the large-cap, institutional stocks -- e.g., Colgate/CL, Johnson&Johnson/JNJ, McDonalds/MCD, and Wal-Mart/WMT.

This all means that the next decline, when it comes (never forget that declines are part of the process), could and should be a buying opportunity because:
1) The market nears the end of its high level consolidation (~12 years complete of a typical ~16+ years);
2) New leaders should (and do!) begin to emerge;
3) The decline, when it occurs, could be especially hellacious (thus gut-wrenching), but should be fractured; some stocks, groups, and sectors will decline, while others rise.

It is my task, as investor, to identify the bullish stocks, groups, and sectors, await moments of lessened (if not low) risk and high reward, invest appropriately, and hang on. My task and objective is not to play the relative performance game (how does my return stack up against the market or a benchmark) but to obtain for you, my clients and readers, the best quality investments at the best price and time. And await fruition. As is always the case, I believe I already have identified several investment candidates, and now I await the timing opportunity. (Please refer to InvestmentPoetry for specific investment opportunities and timing.)

Full Disclosure: Long Colgate-Palmolive/CL, Johnson & Johnson/JNJ, and McDonalds/MCD.

-- David M Gordon / The Deipnosophist


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