If you are a believer that history repeats itself, I would encourage you to read the following article regarding “Black Monday” and the similarity between today and 1929.

Be cautious.  Talking heads are telling us that everything is fine, but the statistics (unemployment, earnings, foreclosures, etc.) are telling us otherwise.

Black Monday: Ancient History Or Imminent Future? | Phil’s Stock World.

Down - Bob

If you are a regular reader of BobandScott.com or or the Bob and Scott feed, you will see that I haven’t had a positive view of this economy and my feeling is that the market got way ahead of itself.  Today could be a pretty big move toward a prolonged down move.

The Gov’t threw a TON of money at our economic problems. Unfortunately, the public sector is hoarding any cash they have and not backing up the buying. How is the car market?  How is the housing market? How do you feel if you are an insurance agent or financial planner? Has your insurance rate gone up? Look at your own neighborhood and ask the questions about how things are going.  Your own back yard should be telling.

When real estate sales are rolling along, there is equity coming out of homes and moving into alternative investments.  That has not been the case. Folks who used to qualify no longer do (2 in 3 applications do not qualify).

I expect the downside in the DJIA to test 9100.  This down move could be prolonged due to some very likely bank issues that could rock the market.  Remember, the bank projections were based on a worst case scenario unemployment number.  Not only are we at that number, and likely past it, but those who are employed are seeing salaries, hours, and overtime cuts.  9.5 ouch.  9.5 with less payroll. Big Ouch.

I asked Am I too doom and gloom? back on 9/17/2009.  I really don’t think so.  Now, I am thinking that I might not have been negative enough.  Sure, I moved some money to cash, but I haven’t positioned enough for the downside move.

Let’s also not forget that we just got out of the 3rd quarter.  Wall St. (the gov’t involved portions anyway) has seen their pay scrutinized and cut.  Bonus that comes from a strong quarter was at risk.  Guess what happened at the end of the 3rd quarter?  We powered up.  Nice move when it comes to bonus time.  Traders, you can remove the window dressing now.

What do you believe?

Bob

When trading in public view, I have come to realize that my parameters are a bit unrealistic.  When I enter a position, I am typically going in with too little capital at risk.  At the same time, I am trying to extract a particular dollar figure out of the position.  Typically, I am trying to reach 7%-8% profit on a trade.  That is completely ridiculous in the grand scheme.  I have entered trades with a profit goal of $100-$300.  When looking back, it is completely absurd in some of those cases since the security would have to move 10%-20% to achieve the return.  I have been fortunate, in many cases, that we are in a VERY volatile market.  A 10% swing from the day low to the day high is not unusual.  But, that won’t last and I have be get realistic about where things need to go.

A quick trade that I made earlier today is a prime example.  I bought puts in the DIA.  I bought 10 puts at $0.97 ($97) a piece.  My goal was to make a quick $100 on the trade.  When looking at that number, the contracts would have to move about 12% for me to reach my goal (after trading costs).  That is an absurd goal to try to attain on a trade by trade basis.  I ended up getting out with a quick little profit of about $95 on this trade.  I had a 10% move in about 25 minutes.  Percentage wins like this don’t help me dial in to 3%, but I must do it.

After analyzing the trades that I am currently stuck in, I have come to an even greater realization of this issue.  I am stuck in one stock because it didn’t hit my 18% gain needed to extract my dollar value goal.  It moved up more than 15%, but didn’t trigger my sell!  15% in a day, and I didn’t take the trade!  The stock has since traded down and I am down more than 5% on the position.  Had I tuned in the dollar value goal with a more realistic move in the shares, I would have put a bit more capital at risk, set an exit at a more realistic price point and achieved the same end result.

The exercise of trading in public view, has been educational for me.  It forces me to go back and analyze what I did wrong.  Was it my reason for buying?  Was it a bad entry price? Was it a macro event?  In most cases, it was an unrealistic exit price.  If the market choppiness abates even more, I will need to be dialed in even tighter.   I don’t expect it too become less choppy anytime soon, but I have to be prepared when the time comes.

Yahoo reported earnings numbers yesterday.  Numbers were about as expected and YHOO has had a very nice 6 month run in its shares.   However, if you were a casual reader of news online, or if you get your financial news from your local news, you better check the facts.

There isn’t much that burns me more than a local news reporter who will say that Yahoo ‘earned‘ $1.57 billion dollars this quarter.  Cut to the witty banter with their co-anchor about “must be nice” or some other thoughtless comment.  What is the point, if you can’t get it right.  The difference between earnings and revenue is a extreme as the difference between the number of wins a team has and the number of games they play.  Imagine if your sports reporter stated that your local NFL team had 16 wins last year.  They are that different.

There is a site that covers all aspects of the search engine world. They are a solid news source, but they are clearly allowing a non-investor to create their own summary for the daily newsletter.  Read below:

From a daily newsletter that I receive:

Yahoo Q2 Earnings: $1.57B, Down 13 Percent Vs. 2008
Yahoo announced second quarter earnings of $1.57 billion this afternoon. Compared with the same period a year ago, earnings were down 13 percent. The company is predicting an even more modest third quarter: “in the range of $1,450 million to $1,550 million.” Search revenues were $359 million, off 15

The article that it linked to was just fine.  That would lead me to believe that they are having someone who isn’t as savvy, or doesn’t care much abou their job, type the summaries.

Here is a quick guide for the lazy and ill-informed when reporting on earnings numbers:

• Revenue does not equal earnings!
• Annual sales do not equal earnings!

Important stuff.  Please get it right.  People are listening and reading.

Bob and Scott