Starting the Year Right


Maybe I wasn’t listening very carefully today, but this year in the stock market seems to be getting off on the right foot.

For me, that has nothing to do with a 200 point gain, but it has everything to do with platitudes and what is frequently assumed to be the “conventional wisdom” not making their annual appearances.

Okay, maybe the 200 point gain has something to do with it, but I like to think that I’m bigger than that, even though I know that my superficiality won’t take me there.

Specifically, getting off on the right foot means that there was a noticeable absence of anyone getting on the typical first trading day of the year talking points.

In the years that I’ve been fairly addicted to business television the beginning of the year stories are always the same.

Dogs of the Dow, January stock rally, retail sales revisions come in better than expected, Super Bowl Indicator theory and so on.

There’s usually also some human interest story, like the twins born in different years.

Great stuff.

I guess I’m so sensitized to these kinds of stories that the recent nightmare I had made so much sense.

Listening to Dana Telsey describe how this year, once again Chinese restaurants and movie theaters in major metropolitan areas saw 30% of their annual profits maerialize during the week between Christmas and New Years.

Roller Coaster and Vomiting

So far, there hasn’t even been a summary of best and worst performers, although that has to be related to my inattention.

Although, still, its absence may be plausible. I guess when you can go an entire year and not see anything change in the S&P 500 level, it’s almost as if the year had never happened, other than memories of the vomiting during the up and down segments of the ride.

That’s exactly why you need to sit in the front row of the roller coaster. Staying ahead of the curve works. Sitting behind someone who vomits doesn’t.

Now to be totally fair, I did hear someone refer to the “Dogs of the Dow” theory on Friday, but did so only in the context of pointing out that the list for 2012 looks pretty much like the list for 2011.

That’s not the way it’s supposed to work, so maybe that explains today’s silence. Of course, that silence may make adhering to the theory a good idea, were it not for the stocks involved.

After the past week, which was so utterly boring, it really was nice to see a definitive move, especially in a higher direction, but I pretty much traded myself out for the day after the first 60 minutes.

I’m not usually prone to making New Year’s resolutions, but I did so this year.

The first, has already been satisfied.

I resolved not to send out a single Tweet on New Year’s Day and I kept that resolution, despite the fact that my quality of life was demonstrably  lessened as a result.

I made no other resolutions, so I’m pretty clear for the rest of the year.

There are, however, a few investing mistakes that I’ll try not to repeat in 2012.

The fact that writing calls so religiously has sometimes caused me to miss out on some unexpected stock gains, such as Visa, on two separate occasions, is not one of those mistakes.One of my investing resolutions, year in and year out, is to not have regrets.

Probably the biggest mistake I made was to think that I could time stocks and decide what direction momentum stocks would move prior to announcing earnings.

Since I’ve already made it abundantly clear that I’m a lousy stock picker, why not compound the misery by adding timing to the equation?

Although I’ve very much cushioned the disappointment of Green Mountain Coffee Roasters, Netflix and Amazon with aggressively going after call option premiums and cost averaging down, the investment dollars could have been better spent elsewhere.

It’s not likely that my hope that all three would stay in the current ranges for about 40 weeks would have a chance of occuring. But if it did, selling weekly calls would bring you share cost basis down to about zero.

As much as I tell myself that I like the thrill of the ride and the opportunity to make hedging corrections, life would be much easier if the roller coaster went only in one direction.

In the case of CNBC Fast Money, that direction is downward. Its probably become my least favorite show show on CNBC, although I do like Scott Wapner, who is the new host of the afternoon session. For starters, Dennis Gartman is on far more often than even my tuned out ears can take, although I tend to have the same opinion about the regular panelists.

I still pine for Jeff Macke.

Occasionally, they do have irregulars, such as Ron Insana, who provide added value, as does a semi-regular, Zach Karabell.

I hate it when people say, “in my humble opinion'” as there nothing humble about expressing an opinion, especially my own.

Today, however, there was a gem of a comment that definitely made paying attention a worthwhile pursuit.

Of course, it came from an irregular, Mark Fisher. His softly stated comment was “How can people have opinions on everything?” He further went on to say that if you do have opinions on everything, it’s as if you have no meaningful opinions on anything.

The mystery that plagues me is how Mark Fisher is associated with Dennis Gartman.

When I say “plagues me,” I’m over it already, but his comment was a very refreshing one to hear so early in the year.

As the year wore on, meaning by 1 PM on this, the first day of trading, a corollary to the January Rally story line did pop up.

This one was the observation that as goes the first day of trading for the year, so goes the entire year.

Well, that would certainly be the kind of uni-directional roller coaster that most of us would want to climb upon. I’d whip out the calculator to see how 250 trading days of action like today would extrapolate out, but I don’t think my trusty Texas Instruments circa 1974 calculator can carry through on that many digits.

Although there was a reportedly 60% concordance betwen a positive open to the year and the S&P 500 close, to their credit, the two experts downplayed the correlation, in all likelihood, because there is none, if you use the strict definition.

Or real statistical analysis.

However, one did go on to say that in the very few times that a year has ended perfectly flat, the following years, on average, had a 35% gain.

Since that’s based on only 4 instances, it’s not likely that you’d want to invest the ranch.

But still, with the year getting off to an auspicious start, I’m looking for a year end S&P at 1450.

That would represent a 15+% increase, or as I like to look at it, a rate that would take less than 5 years to double your money.

That leaves me in an even bigger quandary.

For me, the call writing philosophy that Barrons had so warmly embraced, is based on my long term optimisitc outlook that is in turn attenuated by short term pessimism.

That turned out to be a good way to go in 2011, as long as you define optimism as meaning neither up nor down.

But given an outlook for a 15% rise, where does the buy-write strategy fit in, especially if fear of missing out (FOMO) on any rallies is a concern?

That gets me to yesterday’s blog.

I guess that could also count as a New Year’s resolution, in that I did vow to not overthink. Since buy-write got me here, it’s buy-write that I’m going home with.

That was easy.

Today that included selling calls on Green Mountain, Freeport McMoRan, ProShares UltraShort Silver ETF, Alcoa, Mosaic, British Petroleum and Riverbed Technology in addition to buying more shares of the UltraShort Silver ETF, which plummeted in price as silver and gold both rallied, continuing last week’s stunning reversal.

Although I know and understand that you really can’t predict that this will be a great year on the basis of a single day, my optimism was set in concrete as Mandy Drury compared the price breakouts seen today to “zits on a teenager’s face.”

How can you argue with those sort of signs?

That one alone makes it worth paying attention. 

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