Thursday, September 2, 2010

On for the Ride

My favorite market metaphor is the herd of elephants. Those are the "beefers". A "beefer" is a Big, Evil Fund. A Big, Evil Fund is an actively managed fund (hedge fund or mutual fund or the proprietary trading desks on the Street) with more than $100 million (likely leveraged a lot) which mostly tries to make money trading. Nowadays, many are run by computers.

The "market" is a herd of them - like a herd of elephants. There are few brains: very, little fundamental thinking. Elephants are smart, so maybe dinosaurs are a better choice for the animal. They had small brains. The Steagsaurus had a brain the size of a walnut and a multi-ton body. Or maybe a Brontosaurus.

Beefer behavior is like a heard of brontosaurs: they mill around the water hole, stomping on everything that moves on the ground, and eating everthing edible. Their computers try to extract "vig" from the real investors and the dumb money. After awhile, the water hole is all mud and the food is gone. Then the herd will head out looking for the another water hole. It might be a "bullish" or a "bearish" water hole. Some sectors might be favored, or they'll just play the indexes.

That's what happened yesterday. The herd started moving out.

How does a small, agile mammal - like the common man investor - survive & make some money ?

When the herd is milling around, stay in the trees. If you get involved, you'll get stomped. Pick off some trades on the edges of the herd when asset values get out of whack. Mostly wait. Sit.

BUT keep looking for signs and portents that might signal the herd is getting ready to move out. When it does, don't be afraid to hop onto the back of a Brontosaur & ride along. That's how you make the big money. Ride a trend to the next water hole. Then get into the trees again.

Krypto knows this and has hopped onto the back of a Brontosaur for the ride. Yesterday I bought much $ in US index funds, mostly VTI. If the move is a feint or fades, I'll get back into the trees, but until that seems obvious, I'll enjoy the ride.

By the way, Krypto is a Kelpie from Australian and those dogs are bread and trained to climb onto the backs of a herd of sheep to move them through the gate. Riding a big Brontosaurus is no problem :)

Word of the Day

"Flagitious" - adjective [$10]
Flagitious means criminal, utterly villainous.
Sentence: So much flagitious behavior of politicians and would be politicians has been exposed and is occurring that finding honest candidates seems to be a mission like finding a few righteous men in Sodom.


Frosty said...

"Yesterday I bought much $ in US index funds" upped your position by what are we talkin...$5015498481616798146134987

Bunkerman said...

hey, that buy was a lot of money.

And lots of readers follow my asset allocation, so I had to tell them.

It was more than the entire old 1-2-3 Fund, like going 150% long in it.

mfl59 said...

we need a 1-2-3 fund trade...asset allocation is for monkeys...come on sir...

Bunkerman said...

sorry, for now, my brain is not working on individual stocks.

maybe I'll get an idea soon.

Frosty said...

"my brain is not working"...the rest of that post was a waste of data storage sir...just sayin :)

Bunkerman said...

lol, data storage for comments is Google's problem.


Frosty said...

"It reminds me of the sort of action we'd see in "normal" markets when stockpicking mattered and good charts and earnings mattered more than market timing."...thx jim...nice to see jim is still a reader...I guess Sal can take us out of the moron camp Bunky now that he has heard the gospel...where is our lil brownnoser today.

mfl59 said...

"stop guys or we will have noone left"

pathetic....a pathetic excuse for a man

Spin-em said...

entire post sent from my ipad

O----Kaaaaaaay Neil Armstrong