Well friends and uniques, we collectively find ourselves smack in the middle of the grey zone. In this not-so-imaginary force field (opposite the wall of worry, which is imaginary) that only appears when the winds of earnings season blow, the market will receive some early financial statements and comments to snack on, digest and then sit anxiously awaiting another feeding.
The phase brings with it speculation on macro and company developments based on a small sample size of data. Often the market accurately sniffs out earnings season inside of three reports, other times it's horribly wrong. It's a giant crapshoot.
I use this momentary break in the action to squeeze in the last management chats before quiet periods and stalk the market. I am not prepared to dominate an earnings season weeks in advance. I will have lost the battle before it began. But here is little snapshot of how I venture off into book land to find old-school investment quotes that keep me firmly anchored (and amused because most are absurdly outdated), which is counter to the happenings between 9:30 am and 4:00 pm. Staying grounded in your investment discipline, as in life, is a surefire ticket to success.
Memo: I am not divulging where these quotes came from, just be aware they are sourced from pieces of paper, not Wikipedia.
Top 5 Quotes
- "The way to succeed in the market is to concentrate on what matters and to block out the noise." -- Practical application: Earnings season has started on a darn near thunderous note, the rest is noise. Any news going forward that is counter to the positive early information would have to first be scrutinized for company-specific attributes and then broader market applications.
- "In the short term, no one can predict the course of the economy." -- Practical application: Make your own predictions, don't rely on the banker with the white collar, striped shirt and purple tie that was bullish in August 2011.
- "If a company prospers, you share in the prosperity." -- Practical application: It's inappropriate to invest in dog-with-fleas companies in the present market on the assumption beta chase lifts those woofers. I see numerous signs of technical breakdowns near 10-day moving averages, most prominently in the consumer discretionary sector.
- "Because they are so risky, stocks are a terrible investment for short periods." -- Practical application: If you do not know at the minimum 10 themes from the economy and 10 focus items on each company held in the portfolio, liquidate and hold cash. Earnings season ain't for you.
- "Do sweat the small stuff." -- Practical application: Quick, of the Dow Transports, SOX and Baltic Dry Index which has outperformed in the past three weeks? My point exactly.
I yearned for in excess of 61 Dow points on Wednesday considering the favorable start to earnings season. But importantly, the stocks that delivered the financial goods to their remaining shareholders were rewarded by the market (WD-40, for example), a telltale sign of non-believers having given up on the near-term possibility of upside and overall individual stock selection. Stay hungry.
I pride myself on keeping crazy detailed notes, but admittedly forgot a Dec. 15 buy call on Facebook (FB) (as seen in this video with my very good friend Jennifer Schonberger). The e-mails I received yesterday were on whether to buy more of the stock or cut bait and run. I think a trader could be a little piggish here for the simple reason that Facebook is the ultimate momentum name and the stock's appreciation is signaling a 2013 performance runway (and stream of headlines) that are in stark contrast to 2012. Until Mr. Market hints the momentum trade is over (momentum trade is happening today because the fundamentals should be on the verge of improving, namely monetization) ride the pony.