FEEDMy regular readers may have noticed that I have become bullish in areas other than commodities. The Merrill Lynch report on Key Trends in the Chinese Economy really impacted my thinking. As wages rise in the industrializing emerging markets, it is perfectly reasonable that consumption of consumer goods will increase. Therein is the opportunity. Over the past two months, I have been building a new portfolio called The Big Spend. To date it includes: Apple, Nokia, Research in Motion, MasterCard and as of yesterday Sony. I am considering adding China Mobile. This sector will only get hotter as signified by yesterday’s private equity deal where Alltel was bought out for $27.5 billion.
I am currently re-reading the investing classic “Reminiscences of a Stock Operator” about fortunes and misfortunes of legendary trader Jesse Livermore. This is required reading for anyone desiring to profit from the stock market. One of the key messages throughout the book is that traders must evolve. In other words tips and trading services are great, but it is hard getting rich playing someone else’s game. So, you must learn to synthesize the information and apply it to your overall trading philosophy. Like they say on American Idol - you must make it your own. Your trading style must evolve to fit your personality.
Your trading style must also evolve to fit the market’s personality. In other words, be bullish when the market is bullish, bearish when the market is bearish and sometimes it pays to do nothing. Believe me it sounds much simpler than it really is.
“The desire for constant action irrespective of underlying conditions is responsible for many losses in Wall Street even among the professionals, who feel that they must take home some money every day, as though they were working for regular wages.” Jesse Livermore
I was reviewing my portfolio a few weeks ago and it dawned on me that I currently have my smallest allocation to gold stocks in years. If I hadn’t discovered gold stocks back in 2002 - I would still be working my old 9 to 5. So, I have a strong affinity for gold stocks. However, gold stocks haven’t done squat in the last year and a half. Thus, it makes sense to be underweight. By evolving with the market, I now have my largest ever exposure to base metal stocks. This has paid off handsomely as copper, nickel and the other base metals have been on fire and so far so good with the consumer consumption related stocks.
I highly suggest that you read “Reminiscences of a Stock Operator.”
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