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!

29 January 2011

Market branchings manifest decision points

Just now finished my review of the equity markets, an analysis I do each weekend when the lack of market activity provides me a clear mind and perspective. And while yesterday's decline was no surprise (with more decline to occur), I also expect typical seasonal strength to re-appear later in February that provides one last upside oomph into March/April. (The technical analyst's bane and lament: "One more rally!") Except...

Almost without exception, individual charts betray worsening technicals: most stocks begin to droop, many wilt, and a few have withered while still on the vine. Even Apple/AAPL, the portfolio darling for many investors, me included, likely has made its high trade for 2011 at $357. (After hours trade, post earnings report.) Perhaps the market rallies one final time into March/April, perhaps not. My unease comes from what might occur next for the markets.

Subscribers and regular readers know I have been raising cash for the past few weeks via liquidating my weakest holdings -- selling the comparatively illiquid stocks (bull market phenomena), the under-performing, those purchased as trades -- while maintaining my holdings in long term investments. But what does an investor do, what do I do, when the budding decline looks worse than I expected... worse than I prepared for. (30% cash at this moment.)

Please understand: I am no trader, but a long term investor. To quantify that difference, imagine a stock chart with price bars: you analyze intra-day price bars, if a day trader; you analyze daily price bars, if a swing trader. But as an investor with a time frame of 1 year and more, you analyze monthly price bars. Get the picture? Fewer bars = fewer signals. How much weight does an investor grant a given signal, irrespective of time frame? Combine that with my expectation that the high for 2011 would occur as an exclamation mark to the rally since the March 2009 low... and prefatory to a sizable decline, and you are up to speed with my dilemma: Buy, sell, or hold?

Well, okay, that dilemma is every investor's, not solely mine. And it prevails at all market inflection points. So I would like to clarify two more items:
1) While I often increase cash as a percent of my portfolio, I rarely increase it to 100%.
2) I raise cash as a method to swap over-valued for under-valued, risk for opportunity, not as a matter of attempting to time the market's oscillations. (Price = risk.)

But is this moment (the coming days and weeks) one of those moments? You know, like the summer of 2007 that led into the Crash of 2008? I look around and wonder, "What could go wrong (this time)...?"
● Perhaps another liquidity crisis?
● Another crisis of confidence (ala 2008) that rattled systemic confidence?
● The spreading unrest in the Middle East that demands systemic change? (The explanation provided by several market commentators for yesterday's market decline.)
● Renewed food riots, as commodity prices soar ever higher?
(Remember that, in a free market system, prices reflect the abundance or scarcity of an item; in this instance, a scarcity of food for the world's billions of people. And when do rising prices equal the canary in the coal mine?)
● Extreme weather conditions?
● Mass die-offs? (Already plaguing animals around the world.)
● You name the ill

My effort is not to hang the fabric of my concerns for the equity markets on the hook of geo-political problems (if this input, then that outcome); gosh, I am wrong too often (read: always) to claim any special insight. But I do wonder whether the coming decline (over the course of 2011) will be just another intermediate term correction, a speed bump on the road to higher highs... or of long(er) term proportions.

Which returns me to where I began. What portfolio decisions to make now? Especially for a person who transacts few buy decisions, and even fewer sells. I watch markets closely, trigger-finger ready to sell if markets and the world deteriorate and devolve anew. Which brings up one final question... What value is cash in a world gone haywire?

Your remarks welcomed.

Full Disclosure: Long Apple/AAPL
-- David M Gordon / The Deipnosophist


26 January 2011


Poetry does not get much better than the exceedingly fine example below...


Now are we saying goodbye?
I think so but can't be sure.
The last phone call but one
Left everything up in the air.
When you called last, did you mean
What you said when you said you meant 
To say that this call would be
The last if I didn't call?
In fact, I'm not sure at all
If you called or I called you back.
And did you say "goodbye,"
Or I say "good night" and you
Say "Do you mean ‘good night'
Or ‘goodbye'?" I think it was you.
And what were you trying to do
When you said, "You said we're through?"
How could that be since you
Were the first to bring it up?
I don't think it's what I said,
Though you keep saying I did.
In any case, now that you know
That you know what I meant to say,
Why don't you say what you mean?
I mean if you mean to say
That the last call was the last.
I think that that would be best.
If something is finished, it's just
As well to get up and go.
If you're interested still to know,
I like a slate wiped clean,
And if you would pick up the phone,
I'd tell you what I mean.
-- Howard Moss

You really have to love Moss's technique: he used the poem's form and structure to help tell his story. Not familiar with poem structures? No problem; he lays it all out for you. 

Really, quite brilliant!
-- David M Gordon / The Deipnosophist

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17 January 2011

A think ...


But no cheating!
-- David M Gordon / The Deipnosophist


10 January 2011

Away again

I will be away this week, and will return to my desk on Sunday, 16 January. (I will be traipsing through the parks of SW Utah -- Snow Canyon, Zion, Bryce, etc.)

Invest well!
-- David M Gordon / The Deipnosophist


07 January 2011

A brief report of CES 2011

CES 2011 covered all halls of the Las Vegas Convention Center, North, Central, and South Halls, and spilled over to the Sands Convention Center and nearby hotels. Estimates for first day attendance range from 120,00 to 180,000 people!

A few of the early arrivals on Thursday morning next to the main entrance to Central Plaza at Central Hall....

One small section of one hall seen from a transition area above...

North Hall is almost exclusively auto-related items, so the fully-outfitted (all the bells and whistles) cars typically pop up there; cars that appear in the the main halls (Central and South) must be something special indeed...

I was at the Sony booth -- well not a booth, for its display space was the size of 3 houses! -- for ~90 minutes; ogling all the magic and wonder, sure, but also investigating in-depth their new TV, the XBR 929. Too bad its glories do not make for an equally beautiful photo (different refresh rates, etc)...

NBC was there, which included representatives of their SyFy channel and CNBC. Mario Bartiromo after an interview...

What would be a display of wonder without beauty? Only this time, make it Beauty...

Beauty and the Beast (my friend, Kenn Bates, who snapped all photos but this one)...

CES 2011 struck an odd note for me. Compared to past years, pretty much everyone was there, but the whole shebang felt... subdued. No breakout products, no truly gosh-wow moments, no feeling of "I must have that item, now!" The shadow of Apple/APPL loomed large; many items were either me-too products (tablets, smart-phones, etc) or attempting to capture Apple's Halo Effect.

All in all, I am once-again glad I attended CES; certainly I left knowing more than when I started the day, even though no items of spectacular import leaped out at me to share with you. Of interest will be announcements from Apple's MacWorld conference later this month.
-- David M Gordon / The Deipnosophist


06 January 2011

Away to CES

At CES all day today.

Hope to post all about the exciting news, items, and many new gadgets I discover while there.
-- David M Gordon / The Deipnosophist


03 January 2011

Snow! ... in Las Vegas?

Desert? Global warming? Okay, winter. But snow in Las Vegas in January is very rare...

Come sun or snow, my Golden Retriever, his coat shorn, is always ready to play. His motto? "Have ball, will travel."

What a way to start the new year: with fun!
-- David M Gordon / The Deipnosophist


02 January 2011

Separating rumor from news, opportunity from risk

Market professionals rely on the clues that other investors betray, knowingly or no. Positive and negative divergences -- that is divergent action between a stock and its group, a stock or group and the market, and markets themselves (metals vs currencies) are one clue. Another clue is how a stock trades on rumors.

Consider two stocks (labeled 1 and 2) below (click on each chart to enlarge)...

Company #1
Company #2

Okay, you will quickly notice that each chart:
1) Includes daily bars since mid-2009
2) Ends on 30 November
3) Mimics the other, eerily so.

It is that last item I call to your attention: Two near-identical trading patterns... that ends, rather abruptly, come 1 December 2010...

Company #1

Company #2

Of course it would help were you to know the two companies; #1 is AT&T/T and #2 is Verizon/VZ. "Ahh," you say, "Now I get it!"

You probably do. Rumors abound that AT&T will lose its contract with Apple/AAPL for exclusive rights to offer the iPhone in the USA. But that rumor has been around for a good long while; what's different now?

One rule investors keep in mind is, "Buy the rumor, sell the news." It will be interesting to learn the news from Apple, AT&T, and Verizon in coming days and weeks. And the effect that news will have on their respective stock prices, now that the rumor of something has been priced in; arguably adequately so.

Full Disclosure: Long Apple/AAPL and Verizon/VZ.
-- David M Gordon / The Deipnosophist

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01 January 2011

A New Dawn

What better way to start a new year and decade alliteratively signed as 1.1.11 than with Nina Simone's angelic, rhapsodic rendition of Feeling Good...?

And you gotta love Nina's scat!

Happy New Year!
-- David M Gordon / The Deipnosophist


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