SURVIVING THE GAME
OCTOBER 6, 2008
2008 - 1

This is the first post for this new investment newsletter. It is 2 weeks premature due to the extreme market conditions.

I am not a market guru or great stock picker. I am a good follower. I study other newsletters such as The Dines Letter, Dennis Gartman and others. I often listen to market commentators such as Jim Crammer, David Baskin and the like. They are extremely valuable sources of information. My beef is that they are not specific. How would you like to trade following Jim Crammers Lightning round…some people do, believe it or not.

CURRENT MARKET CONDITIONS

Normally I would have little to say about the day to day actions of the markets. My view is that of a 3 month to 5 year time horizon. BUT...this is hardly a normal time. This may be the first time any of you have seen a market like this or felt the agonizing pain of watching your portfolio melt away in front of your eyes, and felt almost helpless. What has been on the financial networks makes me mad as hell so I am forced to jump the gun and send this out today. Also, a few of the conversations I have had with people who are invested have made me realize the need for this newsletter now.

The first bit of advice is to do nothing. Sounds simple but is difficult to execute. Most investors claim to be in it for the long term, not short-term traders. If you are such a person, you should be gleefully oblivious to the current market downturn as you only consult your advisor once per year, usually in Jan/Feb to review your portfolio and make minor adjustments. Reality is everyone wishes that was the case but you are pounded daily with information on the markets whether you like it or not. This leads you to be actively aware, if not involved, in the management of your investments on a continuous basis. This of course leads to the knowledge that you are probably down on most if not all your investments. This in turn causes you to become involved in your investments, etc, etc

My advice to do nothing means this…. do nothing out of fear, panic or ignorance. If you feel you need to do something, whatever it is, seek help. If you are managing your own portfolio, and it is sinking like a stone, you are probably in a state of confusion, fear and anger. If you have an advisor you may very well be flipping through the back of Soldier of Fortune magazine looking in the Hitman for Hire category.

I had a conversation over the weekend with a person who has actually gotten this far in this mess relatively unscathed. They have a balanced portfolio of equities, bonds, fixed income and some precious metals. What astounded me was that they were considering liquidating the equities and holding the rest “ until things calm down ” Upon questioning them I discovered that they were not aware why their bonds were doing so well. They had heard on the TV about a “flight to quality” but did not really know what that meant. Upon asking him whose idea was it to tinker with his portfolio, he said it was his brokers idea. After popping a couple blood pressure pills I calmly suggested to him to re-think the idea of selling all his equities and either keep his balanced portfolio or find a new advisor!

The reason for telling this story is to emphasize the point that doing anything without due diligence is not only crazy but potentially financial suicide.

I do not pretend to know what is the right thing to do is for this particular gentleman. I only know that he should have a plan in place BEFORE ever starting down the path he has chosen.

TO THE POINT

If you are hoping I have the answer to what will happen to the markets tomorrow, next week or for the rest of the year, sorry, I do not. I do have opinions but today is hardly the time to launch into my rendition of what the future may hold. Today is about survival.

My intention was to start a newsletter to teach people how to make money by using trading techniques honed over 29 years of trail and error. Every letter I would update the model portfolio explaining how and why each trade was made or why nothing was done at all. I will give specific entry and exit points, no wishy washy “ take some profits on the way up “. Individuals can follow the model portfolio and duplicate the returns experienced by the portfolio. Each newsletter would also include an in-depth study on one particular topic, eg equities, currencies, futures, options, etfs, etc. The goal is to show you not only what I am doing but how to apply the same techniques to your other investments. In short, teach you how to trade/invest. My focus is on equities, options and futures. I’ll admit I’m not much of a fixed income guy but the same rules apply to those markets. Actually, the rules apply to any type of investment.

Right now, some of you may be wishing for guidance. My long-term goal was to begin to offer portfolio management services to my subscribers. Since I have neither subscribers nor a track record with the newsletter to substantiate my claims of greatness, I can offer only this. If anyone receiving this is in desperate need of some impartial advice, please contact Options Guy by email at optionsguy@shaw.ca . If you are facing situations such as margin calls, massive loses or just wondering how and when to get back in, there are ALWAYS multiple solutions to any situation. For example, did you know there are at least 10 different ways to get “ long of silver “, each with different costs, risks and rewards.

Options Guy
Editor
Surviving The Game