Friday, March 14, 2008

Buybuybuy, no Sellsellsell... whatever

The Daily Options Report, right here on our bloggy network at , points out the latest inane market stylings of one Jim Cramer. Cramer of course is the highly- rated carnival barker at CNBC who honks horns, screams, tears up when he thinks of his dear school chum EvilEl Spitzer, and otherwise leads people to think that the equities markets are actually a freakin' three ring circus populated by over-caffeinated chimpanzees.

According to The DOR, Thursday March 13th this snake-oil salesman peddled the following:

Longs: You're On Notice
Buying When We're Oversold Can Be Dicey By Jim Columnist3/13/2008 11:43 AM EDT

Shorts: You're On Notice
Shorts Don't Work in an Oversold MarketBy Jim Columnist3/13/2008 2:15 PM EDT

So, OK, that's news you can use, don't be long and don't be short. Hey, I went to cash on October 24, 2007 and haven't owned a stock in any account since, so I can agree. But then JC goes on his TV show and picks a bunch of stocks for people to buy!

Use this as yet another teaching moment: you should never, ever, have the sound up on the TV when people are telling you which stocks to buy... which is pretty much all day long on CNBC and FBN. Bloomberg too probably, I've never had the sound on with Bloomberg on my screen.

The great trader Jesse Livermore left behind many enduring ideas about how to make money in equity markets. There is nothing new in the markets-- the same things happen decade after decade. That's why the ability to read charts and understand the tape is essential. And, it's why what worked for Jesse a hundred years ago still works.

Among the ideas that Livermore left behind are these two:

-Money cannot consistently be made trading every day or every week during the year.

-Few people ever make money on tips. Beware of inside information. If there was any easy money lying around, no one would force it into your pocket.

So, sometimes the best trading decision is "don't trade." It ain't easy to sit 100% in "cash" for 4 and a half months, but that's what I've been doing. It's a lot easier to NEVER LISTEN TO THE TV TIPSTERS once you make it a habit to just hit "MUTE." I never trade on a tip. And, I never give them out. I get asked all the time, "What should I buy?" I always try to change the subject. If you want me to pick stocks for you just give me your accounts to manage. Otherwise I won't play that game.

During the times in his life when Jesse Livermore was rich and he thought the market was correcting he would leave New York and take his yacht out for a ride. One of his favorite destinations was the American Southeast. I like to think the internet has allowed me to do Livermore one better--- I live in the Palmetto State year round, and never even have to set foot in the Northeast United States. Then again, I don't have a yacht. Thankfully, I don't want one either.