Today I take a break from the investment lessons to write about how Krypto Fund is and will react to event unfolding events in and arising out of the aftermath of the huge earthquake in Japan.
Market participants who read books will likely be reminded of the scenes in that great trading book, Reminiscences of a Stock Operator, when lead character, "Larry Livingston", gets a 'feeling' to short stocks just before the San Francisco earthquake of 1906. When the telegraph stories of the quake appeared, he piled on the shorts, seeing that the reaction of most people would be slow and the true extent of the devastation would take days to come out. Lary Livingston was based on Jesse Livermore, of course, and his prescient shorting before the 1906 quake was legendary.
Krypto did not short, and did not pile on shorts on Friday. She really doesn't trade and doesn't pay that close attention. After, Krypto is a dog, albeit a beautiful and smart dog. But NOW, her model is making noises. This morning it's giving a moderately strong buy signal for Pacific stocks and a moderate sell signal for gold+silver.
Stock futures across the board are plunging, down around 2-3%; Tokyo is down 10% overnight, meaning some prices in the model are rather stale. That moderate buy signal is probably a strong one now. Real estate and fixed income is strong.
I choose to wait until the dust settles. I don't trust the prices and big drops often last three days. Waiting will let me move with the correct, full signal amounts from Krypto Fund.
BUT this is a perfect example of why we sell on the way up .... when all looks rosy. Who knows what the future may bring? Krypto was selling bits of stocks, Pacific included, for months. She has lots of cash, and seems soon to get some good prices for redeployment of that cash.
In today's markets, declines often occur so fast, only a short term trader can act in time and sell; an investor will miss a chance to sell near the top. By the time an investor with a normal life & job reacts, the top is ... a lot closer to the bottom. Those rapid market moves resemble a one way, nonstop elevator ride down.
Word of the Day
"Tropism" - noun [$10]
Tropism means the responsive growth or movement of an organism toward or away from an external stimulus.
Sentence: Although it's a mere computer model, Krypto Fund exhibits dual tropisms, perhaps reflecting the brain behind the model: she leans towards the cheap asset classes and away from the expensive ones.