Saturday, May 12, 2012

Sell in May and Go Away? Not So Fast

“Sell in May and go away,” the old adage goes, meaning that investors should sell their stocks at the start of May and not buy back in again until September or October. But in a recent MarketWatch column, Mark Hulbert says the data shows that practicing such a strategy may be very unwise.

“My review of the historical record found that May over the last couple of decades has actually been one of the stronger months of the calendar,” Hulbert writes. “Its terrible reputation traces to decades longer ago.”

Hulbert says that from the time the Dow Jones Industrial Average was created in 1896 through the end of the 1980s, May was the second-worst month in terms of average performance, with only September being worse. But over the next two decades, May was actually the third-best month in terms of average performance.

Hulbert says there’s a lot of variability in the monthly rankings, and he questions the oft-cited premise behind “sell in May” — i.e., that most big investors and traders head off on summer vacation in May. The hypothesis was given some credence by a study performed by researchers from New Zealand and the Netherlands a decade ago, but, Hulbert notes, “It’s not clear how that applies to the month of May in the U.S. I am not aware of any significant exodus from Wall Street to the Hamptons that occurs in May.”
All in all, Hulbert says that “even if you’re inclined to follow the Sell In May and Go Away seasonal strategy, there is no reason — either statistical or theoretical — to immediately sell once the calendar flips from April to May.”

Bank of America : Insider Trading on May 2012

2012-05-04 - Powell Donald E - Buy 5,000 shares
2012-05-03 - Powell Donald E - buy 5,000 shares

He has increased 100% of his BAC position since Jan 2012.
Powell Donald E
Donald E. Powell (born May 2, 1941) became the 18th Chairman of the U.S. Federal Deposit Insurance Corporation (FDIC) on August 29, 2001, and served through late 2005. He resigned to become Federal Coordinator of Gulf Coast recovery efforts following Hurricanes Katrina and Rita.
Prior to being named Chairman of the FDIC by George W. Bush, Powell was President and CEO of The First National Bank of Amarillo, TX. He began his banking career in 1963 at First Federal Savings & Loan of Amarillo.
Powell has served on a variety of boards, most notably as Chairman of the Board of Regents of the Texas A&M University System, Advisory Board Member of the George Bush School of Government and Public Service, and Chairman of the Amarillo Chamber of Commerce. Powell has also been a member of the City of Amarillo Housing Board and the boards of the Franklin Lindsay Student Aid Fund, the Cal Farley's Boys Ranch, High Plains Baptist Hospital, and the Harrington Regional Medical Center.
Powell received his Bachelor of Science degree in Economics from West Texas State University and is a graduate of The Southwestern Graduate School of Banking at Southern Methodist University.

Friday, May 11, 2012

Winning Strategy in investing : 1. Patience


Patience is indeed a trading virtue, and one that is learned mostly through experience. After entering a trade, you should give the market time to react as you expect it to – don’t get impatient and trade out before the market has had time to move.

Similarly, chasing markets that have already moved is a sign of lack of discipline. If you miss an opportunity, let it go. You’re far better off waiting until the next clear signal comes along, rather than entering a trade once the moment has passed.

Emotions in Stock Market today

A wide range of emotions can affect your trading, in both a positive and negative way. Emotional trading can take many forms, but is almost always a bad idea.

Fear some people find it hard to make the transition from using a ‘demo’ account with ‘play money’ to a real live trading account. When their own money is on the table, they can suffer anxiety that cripples their trading. If you find yourself afflicted, remember the lessons you learned in the demo environment – they will stand you in good stead.

Greed – when your trades are going well, it’s only natural to be excited about the potential for even greater gains. At these moments, it’s vital to stick to the rules of your Trading Plan: if the signs indicate it’s time to close your trade and take your profit, don’t keep holding on in the hope of making even more money.
Stress – it makes sense for you to avoid trading at stressful times. Divorce or illness, or even moving house or changing job, can distract you and cloud your judgment.
Joy – particularly happy times, as well, can affect your trading (and rapidly ruin your mood if all doesn’t go well). You might feel overly optimistic and more inclined to take risks that would usually be outside your comfort zone. Be aware of how your feelings are affecting your decisions.

Anger – you should especially avoid knee-jerk reactions. So, for example, you should never try and ‘get back at the market’ after a losing trade. Sometimes you may feel angry with yourself for making a wrong decision – put it down to experience, as nobody can get it right all of the time and we all learn from our mistakes.

Investment Risk : What is RISK?

In finance, risk is the potential that your chosen investment may fail to deliver the outcome you anticipate. This could result in lower returns than expected, but it could also mean losing all or part of your original investment, or in certain cases even more than this.

How Does Short Selling Work?

When taking a short position in shares, for example, the shares are borrowed from a third party – usually a broker – and then sold. The borrowing isn’t something the short seller will need to worry about though – it happens ‘behind the scenes’ when they request to short sell.

What is short selling ?

Short selling is the practice of selling an asset that you don’t actually own, in the hope that the price will decline and you can buy it back in the future at a lower level. You can then keep the difference between the price at which you sold the assets and the lower price you paid to buy them back.

"Short selling is also known as going short or shorting."

Monday, May 7, 2012

Charles Munger + Warren Buffet on China's Future

China, a favorite subject in the investment community, was brought up by a shareholder who wanted to know what advice Buffett and Munger had for the world’s second-largest economy.

“We are not spending any time giving advice to China. China is doing very well,” said Munger.