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The Anatomy of a Profitable Process

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Affecting positive change through financial understanding.

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Minyanville is an infotainment community that aims to affect positive change through financial understanding. We do that in many ways with an eye towards enjoying the journey despite these trying times. Now, more than ever, our charge is mission critical as the chasm between what people know and what they need to know must be bridged.

While we create branded content from the ABC's to the 401(k)'s, the nuts and guts trading stuff has always been our wheelhouse. As we don't "do" advice in the 'Ville-that would be impossible without knowing particular time horizons and risk profiles-we share what we're doing, how we're doing it and, most importantly, how and why we do it.

With hopes that sharing our process adds value to yours, the following stream of consciousness is the anatomy of my recent trading try:

King Jumps Queen. Rook Jumps Queen...
1/21/2009 3:28 PM

It's nuttier than Austin Powers' coffee out there! A bank crash Tuesday, a reverse bank crash Wednesday, a sale at Penny's... I mean, Jeezums, are we having fun yet? Some thoughts, as quickly as I can scribe 'em:

  • Remember way back on January 7 when I scribed my ten themes for 2009? Nestled in there was the following vibe:

    The January 20th transfer of power is an important inflection point, for if we can collectively navigate past that date without geopolitical conflict, stocks have room to run into March or April, when the bloom begins to fade on the new administration's rose.

  • I'm not smart enough to know if we've seen the beginning of that trade but it's worthy of a mention given the price action and, perhaps more importantly, the timing of the price action.

  • Consistent with my last Buzz, I've made sales in Bank America (BAC) and slapped a tight trailing stop on my Wells Fargo (WFC) bet, which will be "gone but not forgotten" by the closing bell as a function of earlier eyes.

  • I've still got my Citigroup (C) but, while only a three-dollar stock, 30% in a single session begs some sales (yes, discipline Gods, I hear you).


  • No matter what you're view of the next 20% is, that doesn't mean you need to lug huge overnight exposure. The markets will be open tomorrow and opportunities abound on a daily basis. Discipline over conviction.

  • How bout some SRV? No matter how busy we are, there is always time to remember.

  • As always, I hope this finds you being the ball rather than Marsha's nose.

Other, Tertiary Random Thoughts…

  • One of my primary concerns at our current juncture is the notion of social mood and risk appetite. Remember, the lion's share of the 2008 financial carnage occurred in the fourth quarter and for many, that point of recognition will arrive when the latest investment statements arrive in the mail.

  • While it's entirely too early to issue an all clear in crude, we must respect the potential that, if Texas Tea continues to lift, investors will point to the "double bottom" with the benefit of hindsight. Yes, I still have my place-holder in the USO as ghosts crowd this young child's fragile, eggshell mind.

  • Old school Minyans remember that "excess breeds excess" and that dynamic applies to both time and price. Keep that in mind regardless of which way this fray sways as a matter of perspective.

  • Talk about a mirror image of our prior scrimmage. Back in 2007, when we flagged the financials, the analyst community was uniform in their optimism. Now, after the 80% crash, a quick sniff finds the following:

    • Citigroup (C): 13 of 18 analysts have a hold or sell rating.
    • Bank (BAC): 14 of 25 analysts have a hold or sell rating.
    • Wells Fargo (WFC): 12 out of 24 analysts have a hold or sell rating.
    • JP Morgan (JPM): 7 of 18 analysts have a hold or sell rating.
    • Goldman Sachs (GS): 12 of 21 analysts have a hold or sell rating.

  • Remember, I'm in the rental-not storage--business. While my inclination is to give my exposure in the financials some room, risk management must always trump reward chasing. That means something different for each of us and therein lies the art to the science. When in doubt, trade "in between" and no matter what, respect the elephants.

  • Microsoft (MSFT) misses estimates and cuts jobs. Nokia (NOK) lowered its dividend for the first time in seven years and cut the industry outlook. General Electric (GE) trades like it has the black lung. Yes, the news is bad… but it always is, near a low.

And Finally, the I shared the following vibes on The Exchange recently and thought ye faithful might enjoy it. It was in response to a healthy and respectful debate regarding our current societal juncture:

I've long believed the friction between opinion is where true education lies. I thank each of you for adding to that equation.

I have to believe that there's a better way to do business; a place where a handshake means something and integrity counts. Perhaps it's the old school Ruby in me but there's innocence in purity.

That point of recognition has passed-we saw martial law in the markets in 2008-but the specter of change is a powerful thing. The easiest thing to do is to point fingers-trust me, as old school Minyans know, we were loud when it was of no benefit of us to be so, but we were steady in our message. The writing may indeed be on the wall but the paint isn't dry... yet.

The only way to affect positive change is to do so individually. If society is indeed a sum of the parts, change must begin within. For many, it is underserved. For others, warranted. Be that as it may, it is what it is and we'll do what we must as we have no other choice.

My greatest concern moving forward isn't financial, directly, but rather societal and geopolitical. People are angry and rightfully so. If you were a foreign holder of dollar-denominated assets (down 30% from 2002, still), you'd be pissed too. This storm has been percolating since the word 'recession' became anathema.

Cumulative. Remember that word.

As I've tried to espouse-channeling the Minyanville professors who are far smarter than I-"Financial Staying Power" will emerge as the catch phrase of 2009. Not in so far as the market itself, but with regard to dynamic and lucidity. The fat is dripping from the bone as we speak and it's splattering all over the place.

Apologies for the ramble but yes, there is a point. By being here-as part of our community-you've demonstrated an awareness and empowerment that most folks still can't see. They will, and it's not too late to start.

Yes, I'll plug here-Minyanland is a free site for kids to teach them how to earn, spend, save and give-as education is the key to our future.

Thank you for sharing the critter adventure and know that Hoofy and Boo are right by your side.

R.P.

No positions in stocks mentioned.

Todd Harrison is the founder and Chief Executive Officer of Minyanville. Prior to his current role, Mr. Harrison was President and head trader at a $400 million dollar New York-based hedge fund. Todd welcomes your comments and/or feedback at todd@minyanville.com.

The information on this website solely reflects the analysis of or opinion about the performance of securities and financial markets by the writers whose articles appear on the site. The views expressed by the writers are not necessarily the views of Minyanville Media, Inc. or members of its management. Nothing contained on the website is intended to constitute a recommendation or advice addressed to an individual investor or category of investors to purchase, sell or hold any security, or to take any action with respect to the prospective movement of the securities markets or to solicit the purchase or sale of any security. Any investment decisions must be made by the reader either individually or in consultation with his or her investment professional. Minyanville writers and staff may trade or hold positions in securities that are discussed in articles appearing on the website. Writers of articles are required to disclose whether they have a position in any stock or fund discussed in an article, but are not permitted to disclose the size or direction of the position. Nothing on this website is intended to solicit business of any kind for a writer's business or fund. Minyanville management and staff as well as contributing writers will not respond to emails or other communications requesting investment advice.

Copyright 2011 Minyanville Media, Inc. All Rights Reserved.

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