Wednesday, January 5, 2011

Making A Living In The Market

I never read The Big Short but it's on the list.  My mind has been too preoccupied with the markets to really be able to focus on reading such a book although I imagine it would come in handy these days.  Anyone who has been fading this market, fighting the Fed, not drinking the Koolaid has been struggling for sure.   Everyone wants to believe they are a contrarian.  No one wants to believe they are part of the herd.  Ask 100 drivers if they are above average and 90 will say yes.

I'm still relatively new in my trading career.  I do trade for a living and what 2010 has taught me I know will be extremely valuable throughout my trading career.  I had two options in 2010.  I could have gone long of stock and partied all day long.  Sure there were dips but in the end I would have made out well.  The other option was to learn how the markets really work and that meant missing out on those massive gains.  2010 taught me to read behind the headlines, to form my own opinion.  In my earlier trading days I was truly part of the herd.  What CNBC said, I believed.  Often I would skip the article and simply grasp the headline.  To be a true contrarian means to be able to form your own opinion and in forming that opinion and seeking the truth, that is where that contrarian point of view often arises.

2010 from an educational standpoint for me and I am sure many is summarized quite simply

"Give a man a fish and you feed him for a day. Teach a man to fish and you feed him for a lifetime."

In 1996 I opened a retail store and was told I would fail, I couldn't compete with the big box stores.  There was no shortage of excuses but to me I saw something others did not.  I saw an opportunity and had the passion and dedication to achieve a dream.  Twelve years later I sold a very profitable business to move onto the next dream in my life.  The point of the story being to be successful at anything you need to have passion in your work and the ability to see what others cannot see.   The big question that will separate profitable trades from unprofitable in 2011 will be the health of our economy.  Today we saw a huge ADP beat.  Funny how we had the same thing just 30 days ago and the NFP hopes were dashed two days later.  Fast forward to today and we all love the ADP report again.  So perhaps Friday's NFP report will be huge (although I think it will have lots of part time jobs and how you can grow an economy on part time work is beyond me).  

I truly believe the US economy is headed for a very difficult if not recessionary 2011.  I can give you all kinds of stats to support my argument while those on the other side of the trade can support their thesis.  Trading is about having an edge.  It's about thinking for yourself.  I am confident in my ability to do that.  I am confident in my assessment of where things are headed.  I won't be stubborn and hold onto a belief should the data contradict my views.  It would be easy now though to jump on the bandwagon, go long stocks and say the economy is strong.  I don't see it though.  It would have been easy when my business in 1996 was struggling to get off the ground and quit.  Accept that others were right.  

We are approaching a very critical juncture in the US from both a social and economic standpoint.  I'm not some fanatic who wants to see a recession.  A recession in 2011 could hurt a lot of people.  Until we clear the fraud, the waste, the insolvent balance sheets our economy cannot move forward.  I believe fewer people will be hurt the sooner we truly address our social and economic problems.  


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