(In case anyone ever thinks the only posts on Slope are fawning ones, here is proof of quite the opposite – – Tim)

I did very well in the resource run-up of early 2000s and over time became fully invested in mostly jr. resource and emerging market/international plays. This ultimately proved disastrous when the meltdown commenced in 2007 or so. 

Having been through downdrafts before the best strategy had always proved itself to be just wait it out and come out stronger given the strong underlying fundamentals. That is the way I decided to play it and as a result watched many of my faves — which had risen 10x or more — tumble over time and in at least in one case the residual remainder of the position went back below original purchase. 

Figuring I needed to do something to prevent more profit erosion — as for some reason could not seem to hold shorts for longer than two minutes — I decided to broaden my horizons and sought out new views such as SOH here.  While I was largely too late to take advantage of that magnificent Bear party, it has made me a better trade and investor and given me a broader perspective than what I had before.

At the same time now that I have again become all wise and knowing 🙂 have to say that continuing to follow this place has cost me money.  I am a big boy and recognize it is how I deal with the info. Also do believe we will have another rip-roaring bear party at some point — but the key point is that time is not today and to keep staring in disbelief and piling on the shorts at the slightest sign of weakness in the hopes of calling the top has at least over the last few months been a very costly strategy. 

One of the smarter investor's I know came out with a statement a few months ago which I found very intriguing and helpful.  Basically he noted people tend to trade and invest the way they wish they had traded, or which brought them success during the last cycle.  

His point was there were an awful lot of people who had been trained to just grin and bear it and hold on to positions given belief "stocks always outperform in long term" who would now cry out "never again" and start throwing things overboard wholesale at the slightest sign of weakness.  In his view that was justification the real correction would not come for some time to come.

That has not been an easy strategy to follow — particularly if one is a regular SOH reader 🙂 but it has at least since March been the correct one. 

What's the point? Basically as the headline says, the Trend if your Friend …. Until it Isn't. While one can and should hedge a bit as Grandma said "a watched pot never boils" and "all good things will come with time" so there is no reason to rush in until the reversal becomes clearer.

Another professional money manager I know who makes many here look like optimists turned positive awhile ago given his belief "the market wants to turn higher" and believes it will not turn back until we start seeing the same blow-off moves to the upside that we saw to the downside last year.  

Incidentally that same person has not really benefited from this call.  He also has become a periodic SOH reader and a few weeks ago after reading a Tim "there is more to the upside post" remarked "That guy is as screwed up as me.  He knows as I do we are going up but can't act on it or at least get out of the way and let this phase pass".

It is really easy to get overwhelmed by volatility in both directions and to extrapolate trends on one or two or three days action and then be tempted to put on and take off positions and always be "doing something" based on what is essentially noise. Guess in a way that is what day- or short-term trading is all about. I am as guilty of that as anyone else and suppose it is a matter of style.  While I do enjoy watching the story when I look at the accounts I trade every day against the ones I rarely look at — not sure which is the correct strategy especially given the time I spend on the active ones — but anyone here probably has to at least question whether they are a bit too close to ground zero at times and take a step away.

Before wrapping up this meandering have to admit to having prepared a similar post when Tim started with these guest posts. This was just as we seemed to be reversing and even the two people noted above had begun to question the sustainability of the move  – and I decided not to go with it as I again began to engage in self-doubt and thought it would appear foolish.  Of course while I understand the futility of too much coulda shoulda — as I was letting myself get stopped out of positions and again focusing on which inverse ETF would serve as the best hedge and profit generator during the tsunami down that was sure to come — and which did in fact turn out to be profitable trades — it turns out I was missing the chance to position for the next rise.

Oh well, at least I was not mega-short.  Nothing stated above is any guarantee that today is the day markets to not become in the words of Mr. TK "finally become rational" (though what rational is god only knows).  Life and the market are not easy.  That is probably the only thing we can say for certain.

I was looking at UNG yesterday (the natural gas ETF), and it seemed a bit tempting as a long. As we all know, natural gas is never going to go to $0, and other energy/commodity items had been doing well. It would be easy to rationalize such a purchase, since UNG was a relative "bargain."

But then I asked myself: In this environment, where energy has had every benefit imaginable, why would you choose something which has, on the whole, been such a rotten performer? Because I figured, at the first sign of even any weakness, UNG would be the first to tumble. So I didn't do anything. I just left it alone.

Good thing, too. UNG is down nearly 4% today alone, near a lifetime low. And this is in the context of a market in which almost all assets are up huge. Just something to keep in mind when you are looking at a chart that looks "cheap."

You might even want to use ProphetCharts' expansion feature on items that are near their lows to create some white space beneath the chart. Because seeing a price near the "bottom" of a chart might create a false sense of security. It's not a floor, my friends. It's simply the minimum of the y-axis range.

A number of ultrabear funds are basing pretty nicely. TWM comes to mind. One I like just as much is SDD, shown below.

I imagine you've seen Goldman Sachs congratulating itself very loudly on its Half-Billion dollar "gift" to small businesses. Maybe that sounds like a lot. Let's throw some cold water on this cynical announcement:

1. The money is spread out over a period of five years;
2. A big chunk of it comes from a 'foundation' already in-place, so it's not all new money
3. It represents, on an annualized basis, one typical day of their trading profits (and I think we can all agree that these profits seem to be, shall we say, virtually guaranteed; as with Madoff, the performance reported is statistically impossible, but they're running the show).
4. An unstated portion of this "gift" is in the form of loans. Loans that have to be paid back.
5. In relative terms, the gift (shown relative to just the bonus pool, below, and represented by that razor-thin blue slice) is similar to you or I giving a few dollars to a homeless person (actually, our act would be more generous, since we wouldn't demand the money back later).

Unless you are utterly naive, you know that the culture of GS isn't exactly known for its generosity. This is just a ploy to try to scrub away some of their sin. It will be interesting to see if the public is blinkered enough to actually accept this devilish ruse.