Birchtree's Account Talk

[Birchtree]

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Tom,

There are times when the 50 million Frenchman will move the market whether they are correct or not. I could be 100% correct in my position, any position, and if they move enmass I will still get hurt. It's like the most recent 900 point drop in the Dow - not really any reason for the action except somebody (50 million somebodies) thought they saw a soft patch in the economy. I looked across the valley and held on for the pain I knew was coming. Took some profits, although reluctantly, knowing basically anything I sold would only be more expensive on the way back. I define that as a sacrifice- needed to do inorder to get more funds to purchase other positions at reduced pricing - like picking raspberries in the bear patch.

I went long my TSP account with the C fund 5/3 at 12.60. I've been long the S fund and the C fund simultaneously for an extended period but decided it was time to use the 100% leverage and try and land on the outperformer. So far the S fund is leading but the wall isn't that far off. When Greg finally reaches 100% anything besides G it will be time to start easing away from the table.I only hope he takes at least 24 months to catch up. Now I see you are playing the waiting game - it could end up being the "Crying Game" if we get the liftoff I expect is coming - 1995 could arrive early. To me there is more risk being out than being in at this point in the cycle. Admire your courage and fortitude to stand by your plan. Even Roman 777 has dumped his 100% S position. Mlk-man I believe is still 100% S fund. Pyriel is taking a hitter on 50C, 50S, Macdtrader is bullish, other than that - oh I think Robo may still be bullish - not very good bullish odds per sentiment with our participants. The bottom line is money talks and walks but not in the G.

 

[Guest]

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Can you please answer Tom's question?

You appear to be babbling again.

 

[Birchtree]

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DaveM,

You rascal, I cannot fathom an answer in terms of percentages. It's just impossible. But I'll try to demonstrate my thinking in real terms. For the purpose of TSPtalk I went into a long position in the C fund on 5/3, actual price on COB 5/4 was $12.60. The G fund was at $10.84, the S fund was at $14.00, the I fund was at $15.30, and the F fund - well who really cares.

What I'm attempting to do is use the leverage that cash and going 100% can provide within the realm of what I can work with to my advantage. IT takes a long time in grade to accumulate any degree of cash so that it can be used in a beneficial fashion. Risk is always inherrent when one doubles up on anything - but that is all we can do besides trade. The larger the amounts floating around the greater the opportunity to make money - it just takes so long to get in position. It's a shame to sit in the G fund and collect that copper. Many people are happy to never take a risk and collect their CD rates - not me. I don't mind the elephant grass - jump not knowing how far down. We are helping others realize there are many alternatives to finding the right investing strategy. My pistols are currently holstered, but that doesn't mean I don't take them out on occassion for a good rub and oiling. There may come a time when it will be prudent to cut and run - prudence has always been the better part of valor. But in a buy and hold posture with consecutive dollar cost averaging I don't mind taking a few hits now and then, it's expected. Keeping an eye out for a recession or other economic calamity becomes crucial, you just have to come to terms on how far into the future you want to function.

Now let's use current prices and assume our total fund balances were equal back on 5/4/05. Assuming we both started with $165,000 so you can collect your $100 G money. 10000 shares of G would have cost $108,400, That is the capital required to give you your $100. 10000 times $.01 gives you 100. The problem is you are now minus any lift to compete if you are 66% in the G fund. Extrapolating back will leave you with $56,600 total invested apparently divided up among other remaining funds, maybe $14,000 per in each fund - not very much. I currently would be working with 13095 shares of C fund. $165,000 divided by $12.60 gives me my number of shares. If I acquired the S fund instead I would have 11785 shares, $165,000 divided by $14.00. The C fund to date has gained $.48 and the S fund has gained $1.11 and the I fund has gained $.25, while the G fund has gained $.06 so far. If you multiply them out the C fund has gained $6285. That's 13095 times $.48, if you multiply out the G fund you get $600. If you multiply out the S fund it comes to$ 13081. That is $165000 divided by $14.00, to get 11785 shares, then multiply shares times gain of $1.11. You other positions will provide some gains of course - but not enough to keep you in contention. You are to diluted with no leverage. The initial impulse now might be to go chasing the S fund because it has outperformed, but I think that would be a mistake unless you are like Roman 777 and plan to shoot with it. The primary gains for the long term have been made and the momentum will begin to slow - even though money can still be made there. The outperformer going forward will be the C fund especially in a goldilocks economy where inflation is low and interest rates remain historically low. The F fund will have very little volatility, making it very difficult for even Palladin. I'll be patient with the C fund and wait until the time is right to call upon the Lone Ranger with his pearl handle grips.

Hope this has helped explain some of my investing intrigue- it's really simple - look at everything and believe nothing. That's why most of the time I'm a contrarian. I have learned over the years to set my own path and follow my own seat of the pants rules - that way when I loose I can't blame anybody else, but when I win and take gains I only have to share with the IRS.

 

[SkyPilot]

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Which do you thinkhas a stronger likliehood of accuracy (sentimentvs trends) over a given period?

 

[tsptalk]

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I don't disagree, Birchtree, that we will soon be entering a very strong period for the market. My long term outlook is for 2006 to 2008 to be much like 1995 - 1997, butI think 2005 will have it's ups and downs before takingoff later in the year. I know DMA doesn't agree but that makes a market.

But my question was, where did you get the "there are fewer bulls left" info? Iuse AAII,lowrisk.com, sentimentrader.com and decisionpoint.com for that info and they all seem to be saying there are a lot of bulls. Where do you get your data/info?

Thanks,
Tom

 

[Guest]

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Feels like the early 70s to me.

Crude at these levels and the gov telling us all is well on the inflation front.

However, we did not have this housing bubble, consumer debt, government debt, trade imbalance and unfunded liabilities. But we did have a Vietnam type war (IMHO) and the speak of trade sanctions and tariffs.

And we got a Time Cover .

 

[Guest]

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I know this is hard to read . They color it so you can not cut and paste it :shock:.

This is from VTO as you can see their sediment survey has nailed the market action.

Yellow line is bulls - Green line is SPY.

Looks a lot like late March to me.

I can not cut and paste my service stuff. Was going to take a picture of my moniter and post here but decided I like being a free man .


[align=left]

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[Birchtree]

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Skypilot,

They can both be inaccurate for any length of time - but generally speaking once a trend has established itself it will continue sometimes to the extreme. That's why there are so many technical analysis people trying to read the future - they sometimes run hot in a given cycle - and when they develope a following they will inadvertently turn cold. The market in my opinion is more art than science. But you have ample opportunity to hedge your positions by looking at history, sifting mounds of data like sentiment, ratios, graphs, stars, gurus, idiots, cycles, you name it, we all have an opinion - and we all invest our money. Some yap with no risk - Chicken Little approach, some draw down for a day and head back to the shelter at dusk, others put it on the line, tangent line, vector line, cross over line, A/D line, support line, over head resistance line - you draw the line you make. It's only the money that talks the real talk, and from my bullish perspective the money smells good. I don't have time to draw lines - to much of a fundamentalist at heart - but I will draw lines when necessary. Does that provide an answer -

 

[tsptalk]

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SkyPilot wrote:

Which do you thinkhas a stronger likliehood of accuracy (sentimentvs trends) over a given period?

Great question. I find sentimenttells the story for the short to intermediate term best.The moving averages of put/call ratios seem to be a great indicator for the intermediate term andsentiment surveys are good for the short term, but for the long term, the trend is your friend.

Of course I am a short term investor so there are many buy and sell opportunities within the longer term trend. To each his own. To be honest, I think most, but not all, people are better off sticking with a buy and holddiversified account.

One interesting change in my approach in the last few years, while I look at technical analysis closely, I sawbreakouts as a buying opportunity, now I see them as short term pullback opportunities. And the the other way around for breakdowns. Long term, I believe you go with the breakout/breakdown as it can be an indication of a longer term trend change. Short term I go against it as the overbought/oversold levels are at extreme levels at that point.

 

[Birchtree]

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Tom,

I was simply making a reference to the lack of bulls represented on TSPtalk. Seemed like a contrary indicator to me - nothing referenced from the main press. Heck, even permabull #1 threw in the towel the other day, you eased on out, and the majority of the pistol shooters scrambled too. It was just a generalization on my part - couldn't help notice the green fields were essentially empty. Nothing serious though, they'll all be back in a few weeks when the back up doesn't happen. Remember the 50 million Frenchman - not a time to be against them. This will be fun, watching to see who blinks first. Mike is already starting to get nervous - and this current momentum might run to the extreme waiting to trap everyone before things settle back into reality. The shorts will be squeezed - the hedge boys are already coming back to the commodity stocks - and eventually the trucks and trains will play catch up over the next 4 weeks. I'm comfortable where I sit - reinvesting my dividends in the oceanliner account and thinking of raising some cash to buy some more energy stocks. Comfortable in my TSP account letting my dollar cost averaging work while I take the ride I think is on the way. Firmly believe we will break to the upside in an explosive manner - seen it happen to many times - I'm prepared - and if it doesn't cooperate with my senario - well tomorrow is another day. I've learned to be future oriented - but trying to grasp the larger picture - what does this omnipotent market see ahead of me that I might be unable to understand. According to the laws of Karma - this is one of my golden principles - all wrongs are eventually righted. Waiting for redemption.

 

[Guest]

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I know this is hard to read again D)

but look at when the yellow is high what the blue does and when the yellow is low what the blue does

Yellow is sediment blue is S&P 500.

We had a parabalic move in the yellow - parabalic means straight up - what goes straight up goes straight down normally applies to these type of moves.

I was four days late in getting out of the market. Quad Witch week - that is a double edged sword.. The PPI/CPI is great because of low oil prices was kind of laughable seeing oil go above 55, 56, 57 then 58 and near 59 and the idiots on CNBS saying PPI/CPI is great due to low oil. Like a bad comedy act.

Next week no short covering (WMT and GM, etc, etc - massive short covering in the transports after that Philly Report - was like people were throwing themselves out of their positions and bought stock to cover) just the rotten core. (even playing field) and crude near 59 and gas prices going up again - credit card min payments going up and options have to be expensed.

 

[tsptalk]

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Birchtree wrote:

Tom,

I was simply making a reference to the lack of bulls represented on TSPtalk.

Now see, there's you're problem. We are the smart money.

It's not surprising that we are leaning bearish. For the most part, WE are contrarians going against the herd, and the herd is bullish. Don't against the smart money. I'll be back in your camp sometime in July.

 

[Guest]

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I will be back in your camp with both fists around October .

Me not going to get sucked in just to get hoof prints on my back.

Until then I will be in and out. Crude near 59 to me does not appear the time to put a toe in. Remember the experts this time last year saying crude over 50-55will bethe death nile for stocks. Now 59 is the time to get in? :shock:

I did not realize we had two weeks of sediment numbers at TSPTALK, my bad. I must of missed one of them.

 

[Birchtree]

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Tom,

Isn't it ok for a renegade contrarian like myself to go against the smart money if I think they are wrong and out of the money. We are talking about a short period of time to indulge - but things can hustle in a quiet summer rally. I mean no slight to other participants because I'm long the C fund. They obviously don't agree with my position, and that is fine - we make our money the best way we can.

But I do have a question that you perhaps can tackle. I know DMA will get in on this one too. What creates the most anxiety in an investor - loosing money or loosing opportunity. Watching from the side lines as new highs formed with only minimal retesting for support. Or watching capital circle the drain, wondering if there will ever be another chance to recoup. Would be interested in your thoughts - sure you been there at some point. Thanx

Dennis

 

[Birchtree]

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DMA,

You are heading for the toaster - sorry to tell you that. I'm looking at the yellow line and all I see is what happened in 2003 - all year long the yellow trended sideways - does that have any meaningful significance. Anyone waiting for the yellow to retreat before getting on the train was left at the station for the next 3000 points. I think we have been correcting that 3000 points for the last 1 and one half years and are now ready tp proceed with the next phase of this secular bull market. Care to dispute that statement - call The Technician - get his TA opinion. Thanx

 

[Guest]

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I would cover myself in gas and dance in a fire before I would go long this market right here right now.

2003 was theartificial stimulus of div tax cuts and emergency rates. October to December 2004was the private account sure thing (all that social security money going into the market).

We are fresh out of rabbits to pull out ofthe hat.

 

[Dogdaddy]

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Hey Birch:

I agree that missing last week's steady up-move did cause me some anxiety. I will admit publicly that you were dead-right and I was dead-wrong in our predictions for the week. BUT, please don't get cocky...the significant pullback and correction is coming..if not sooner then a little later. That's what makes the world (and this site) interesting..we all have different opinions about future events. Hopefully, we'll all survive the important financial decisions we make based on the best information available with minimal damage to our net worth and psyche. I am right now on a trout fishing trip in South Fork, CO and feel a little more relaxed being in the G Fund for a bit longer.

Good Luck to all in the coming week !

Nick

 

[Guest]

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Do you got that wonderful dog with ya Nick?

He looks like a real good friend.

Enjoy the fishing.

 

[tsptalk]

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Birchtree wrote:

Tom,

Isn't it ok for a renegade contrarian like myself to go against the smart money if I think they are wrong and out of the money.

Definitely.And you could be right. I never have a problem with someone's position in the market. There are always arguments for each side of the fence. I was just pointing out that a contrarian goes against the herd, not against the smart money. So, I wouldn't call you a contrarian. I'd call you a bull. And there's nothing wrong with that.

What creates the most anxiety in an investor - loosing money or loosing opportunity. Watching from the side lines as new highs formed with only minimal retesting for support. Or watching capital circle the drain, wondering if there will ever be another chance to recoup. Would be interested in your thoughts - sure you been there at some point. Thanx

Wheels and I have had this conversation before. I would say preservation of capital is most important, but emotionally they both hurt equally.

 

[Birchtree]

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I thought I would provide an update on my oceanliner account as of close 6/17. The long market value now is at $887,000, that leaves me with $48,000 to go to achieve full redemption back to my peak of $935,000 on 3/7. Since the bottom on 4/20 I have come back $90,000. Another come back story....

What I found impressive about the market today was how it handled the GAP that was created Friday 6/17. The GAP filled on the open today and there was no crashing under 1208. The market spent the day absorbing selling pressure and tried to rally at the close only to succumb to some profit taking. The sp500 was actually leading today, it now needs to close Tuesday above Friday's intraday high, if that happens the bulls remain intact and this market is heading higher. If the shorts get squeezed this will add buying power to send the market upward.

According to some Elliot Wave Theory works called NeoWave the rally could reach a short term target of sp500 of 1275 -1280. The previous high is not expected to be reached until March 2006. I'm ready.