Monday, January 19, 2009

Show Me The Money?

This is not working
A recent discussion with a friend on the state of the economy turned to the diminishing yields being offered by treasuries. My friend was contesting that the low yield is a bullish indicator and portends well for stocks. I, on the other hand am not convinced that the stock market is ready for a recovery because the economy is still in shambles and there is more pain to come. In other words I am rather pessimistic about the stock market.

The key question I had during this discussion was – what trades make sense at this point in time to profit from the directional bias we have? My friend wanted to debate the nuances of bond yields and correlation to global money markets and the impact of the Feds actions and blah blah blah. Yes – at some level a theoretical debate is just that - a debate. Lots of words, a point of view, ego brandishing and heated arguments. There is no tangible and actionable outcome from these debates.

My point is – does this discourse help you make money, help you become richer, help you get to the next level? If it is idle banter at the end of the day over a cocktail – go for it. Otherwise you have to put on your Cuba Gooding Jr. hat on and ask the question – Show me the money?

If it works – stick with it!

Unless it is a predictable 12% return – courtesy of Bernie Madoff, you need to know what you are doing but if it is working – stick with it. The buy and hold strategy is a big question mark these days. A house being an investment is another question mark. Buying equities is another question mark. 401(K) investing is another question mark.

Who care? Options trading works for me so I stick with it. Usually options are touted as extremely risky but if you know what you are doing – the risk is mitigated. Buy and hold, dollar cost averaging, index investing, emerging market investing – they all work for me so I stick with these strategies. There are bumps in the road – nothing is perfect but I read, I learn, I change direction and I move on. If it works – I optimize it, if it does not work – I change strategy.

Is there only one right way? Absolutely not. There are many options out there for anyone to make money, save money and invest money. Find what works for, why it works for you, understand it, know it, believe in it and stick with it.

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