i Bergamot

Friday, August 26, 2016

DART v2 System Start

I recorded a video how orders where placed and reviewed reasoning of my decisions during opening trades of DART v2 strategy. While on a surface everything sounds benign and almost sleepy, in reality I had a full-blown crisis on my hands. Never mind kids raising a ruckus around a house, I can live with that. But when internet went out I didn't know what to blame. My network is fine and all computers are in order, but of course I went ahead restarting, reloading and powering on-n-off stuff, until I heard some scribbling outside. THIS is the day when Comcast decided to rewire whole neighborhood and send a big and mean looking (but very polite) man to scale a wall of my house in order to cut my fucking internet cable. Took them 2 hours, which was pretty good considering... like I said here (link): "System start is always rocky. Always!"

But, as evident in this video, everything went swimmingly on my end. Orders went thru, positions were filled, all according to plan. This is a beauty of the Market - the game is always on. You can go ahead, do your thing, be busy with everyday nitpicking, while Market continues to work for you. Observe:

DART v2 Opening Allocation

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DART pick

Every week, in this space, I intend to highlight one of the stocks picked by DART method.
It may come as a surprise (at least it was to me), but many of these 'DART picks' are not popular stocks. I personally have never heard about many of them on TV, or read in blogs. Even surveying Twitter and StockTwits did not return many results that were not an advertisement or some mindless click-bait. This makes me very curious - what is this strategy really investing into? I want to stress that I am not attempting to have an opinion or personal bias about any of these stocks. DART portfolio functions just fine without convoluted predictions about uncertain future prospects of it's components. It doesn't mean I will seize to ask questions: "What If...?" And you, dear reader, shouldn't either. Really.

BRCD - Brocade Communication Systems - is a kind of business internet runs on. It is also a kind of a business - the more I read about them, the less I understand what they do. "Solutions", "innovations", "automation" and such meaningless generalities litter their business description. Company website didn't offer any help either, being an endless re-direct nightmare, I couldn't get to a page with description of a kind: 'this chunk does this', 'this hunk connects in between', 'this is how much it will cost' etc. Methinks, they either want to baffle investors with bullshit, or dazzle themselves..., but never mind that. DART doesn't need to take these conflicting points into consideration at-all.

Here is what DART Strategy does:
On August 26, 2016, right after open, BRCD collapsed by 12% on earnings announcement and became a 'worst' losing stock of DART portfolio.
According to selling rule 'b' from Original DART article post (link), BRCD has to be sold immediately. Observing a waterfall decline in a first half an hour of trading, I patiently wait for a local low to form, in order to put a Good Till Canceled (GTC) on-stop sell order just a couple of ticks below. This order will be aggressively trailed up, until caught.

I want to note, that it is not uncommon for these stocks to reverse their entire earnings decline and more. Let the Market sort it out, by banishing all wishful thinking! 'Usually' does not mean 'always'. Nothing is 100%. Just like i said here(link): "Most of Best List stocks don't react much to earnings...", well, this one did. 'Most' is not 'All'. So, for now, we have a clear task at hand - selling BRCD and finding new candidate for replacement. Real time updates are available on a private Twitter feed @SWID_iBergamot or wait for next episode of this series in a week or so...

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Wednesday, August 24, 2016

System 12. American MegaDozen. Introduction.

I developed System 12 in January 2013, but idea for it was my pet peeve long before that.

See, people are running around, looking for stock tips, trying to guess what companies are destined for greatness and ever expanding share price. It's been this way since forever and will be like this long after we are gone. If they stop screaming (extra Jim Cramer) and listen to the Mother Market, they just may learn that die is cast, the race is over and winners are announced. System 12 gives rational speculator an ability to bet on winners while the race is still on.

System 12 (S12), aka American MegaDozen, is a rule based, (almost) mechanical, statistical system designed to invest in 12 biggest and the best companies in USA by using multi-position dynamic strategy. With application of rules, filters and risk control measures, this method increases investor chances of buying and holding leading multinational corporations for months (even years) while their share prices increase and sidestep devastating once-in-100-years bear markets that seems to happen every couple of years (or so).

S12 companies are so big - they dwarf everything else by comparison. Their combined market cap stands at whooping 4.4 Trillion dollars, up from 'only' 3 trillion in 2013. Imagine, if Mega Dozen was a country - it would be 4th or 5th biggest economy in a World! Lest not forget that the biggest three of all - Apple (AAPL), Alphabet (GOOGL) and Microsoft (MSFT) - are actually larger than entire Russell 2000 small cap stocks index (RUT). All two thousands of them...

This remarkable size discrepancy is really not that unique.
The phenomenon of 'extreme' is thoroughly explained in books of Nassim Taleb, famous trader, writer and philosopher, who calls our world "The strange country of Extremistan" (link):

"In Extremistan, inequalities are such that one single observation can disproportionately impact the aggregate, or the total... if we are in the domain of Extremistan, and we use analytical tools from Mediocristan for prediction, risk management, etc., we can face enormous surprises. Some of these surprises may be positive and some may be negative, but their impact will likely exceed what we are prepared for."

I strongly recommend his books "Black Swan" and "Fooled by Randomness" for anyone who wonders how this order of things came to be and what to do about it.

Clever Eddy Elfenbein observed in 2014 post(link): "Wall Street is comprised of a small number of stocks that are very, very large, and several thousand stocks that are tiny". Correct! Moreover, it's been this way throughout most of modern history and especially in 21st Century. Further, he notes:

"...market cap of the S&P 100 makes up about 62% of the market cap of the S&P 500...The S&P 500 makes up about 77% of the entire value of the Wilshire 5000. Despite its name, that index has 3,663 stocks... S&P 100 is about half of the Wilshire 5000. The remaining 3,563 make up the other half..."

This is the World we live in and this is the Market we are given. Don't blame me, I just work here...
Meanwhile we can exploit this peculiar circumstance with reasonable expectation of 'positive surprises'. This is what System 12 is designed to do.

System 12 completely disregards personal biases, gambling urges, economic forecasts and CNBC talking heads. What it offers is a superior stock selection tool and procedure for Stress Free Investing. Why worry about GDP doing this, or economy doing that? Why agonize over conflicting market predictions, or chase latest over-hyped IPO?
The Market already made its verdict and announced it loudly over these interwebs... Listen...

You can take it from here... or wait for next week article, where I will outline portfolio construction and trading rules.
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.this is a first article in 'System 12' series
Read Part 2: System 12. Portfolio Construction and Rules
Read Part 3: System 12. Trade Management
Read Part 4: System 12. Performance and Risk
Read Part 5: System 12. Portfolio Initiation
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Tuesday, August 23, 2016

VIDEO: S&P500 Price Movement and Sectors

In this video I discuss a progression of weekly SPY trend, based on interpretation of my Composite score Indicator (CSI). Relative trend stages of the sectors can be seen in image below the video. I note a double sell signal in Industrials $XLI and explore possible scenarios.

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Sunday, August 21, 2016

READ: Dow Theory by Robert Rhea

Being a student of the market n' stuff, I love to study old original theories. How they self-distracted, or changed, or endured through decades that follow? What can we learn from the original thinkers of the past?

I got seduced by definitive title "Dow Theory", thinking its a complete text with strict plan to follow. Mr Rhea performed a valuable service in thematically combining excerpts from newspaper articles to form a general outline, but its hardly a step-by-step manual. Basic tenets of Dow Theory are plastered all over internet and they are just as vague and contradicting as Rhea's own book. Here is wiki link, if you don't know.

An unexpected and pleasant surprise was an Appendix, taking up more than half of this book. In it, there are 26 years of periodical editorial column by William Peter Hamilton, one of original editors of Wall Street Journal, from 1903 to 1929. A weekly-to-monthly review of market movement with interpretations of Dow Theory. As it happened, in real time, in a words of participant...
Its like blog, only 100 years ago. Awesome!

October 27, 1913
"It is well to repeat the occasional caution given in this column, that the averages make a good barometer, viewed from disinterested point, but are calculated to ruin anybody if treated as a 'system' for playing the market."

January 5, 1911
"There is nothing in the averages to dogmatize about. They are an immensely valuable guide when studied over long periods in the past. They frequently give useful indications of the tendency of market's short swing. For day-to-day trading they are not only valueless but would probably be dangerous as well."

March 29, 1926
"The passionless barometer is disinterested because every sale and purchase which goes to make up its findings, is interested. Its verdict is the balance of all the desires, compulsions and hopes of those who buys and sells stocks. The whole business of the country must necessarily be reflected correctly in the meeting of all these minds, not as an irresponsible debating society but as listening jury whose members, together, bring more than the counsel or the judge can ever tell them in finding what has been called the bloodless verdict of the marketplace."

January 20, 1913
The market does not trade upon what everybody knows, but upon what those with best information can foresee. There is an explanation for every stock market movement somewhere in the future, and the much talked of manipulation is a trifling factor."

July 19, 1910
"There is in Wall Street a small but very useful section of traders which is oftener wright than wrong, and its methods, often unconsciously, are strictly technical, bearing very little reference to conjectures based upon crop prospects or politics."

April 4, 1923
Evey day brings its new experiences, but it is tolerably certain that we shall not have the record of a bull market in which the little speculators successfully liquidated at the top, getting their information from the comic strips in the newspapers."

July 30, 1923
"...the man who picks a wrong stock for speculative purchase, or, more rarely, the right stock at the wrong time... He has no use for the stock market as a barometer of the country's business. He believes he can make money by reading the barometer first and reading business afterwards, or not studying it at all. ...attempt to do both things leads to inextricable confusion."

December 10, 1929
"Mr Hamilton's editorials were widely read and there is an abundant evidence that time and again they exerted a positive and practical influence. Their appeals to thinking men and women may perhaps be attributed in large part to the facility with which he brushed non-essentials aside and went straight to the hart of the question."

Get the book. Go straight to appendix. You'll love it!

Clicking on this link will take you to Amazon.com. If you buy this book or something else I will receive small commission that helps to support this free website.

Friday, August 19, 2016

DART v2

If we make mistakes, Buffett confesses, it is either because of (1) the price we paid, (2) the management we joined, or (3) the future economics of the business. Miscalculations in the third instance are, he notes, the most common.* Robert Hagstrom, Warren Buffett Way*

Original DART Strategy is based on principals of common sense investing into prosperous American enterprises. Although it has foundation in fundamental analysis of securities, DART looks beyond income statements and balance sheets. Our focus is on basic and broad characteristics that are both hard to manipulate and signs of good business at the same time. This prudent strategy attempts to deliver a narrow dynamic list of sensibly priced stocks of best companies in USA, for immediate investment. Although statistical lens is impartial, it can not see what is hidden, nor it foresees the future. I don't pretend to predict prospects of stocks I invest in, and apparently Mr. Warren Buffett ain't got a clue either. Good, there are already two of us and I'm in a pretty good company...

In order to function properly, Dart Strategy Portfolio has to deploy multi-position rotational methodology, in which both winners and losers are being sold in efficient manner. I personally designed and traded several systems with 10-12 positions and can attest that it was sufficient. The most recent example was a test run on this very strategy, discussed in previous DART post (link) Loaded Gun. But can it be done with less? If investing in stocks is nothing more than throwing darts at stock-tables, can we get a better dart-board? DART v2 is expected to do it with 6 Standard Position in $20,000 portfolio, but even I am not sure if it is possible.

Dart is a strategy to scan available database of fundamental information, looking for good business, priced at good value, in order to build a definitive watch list from which to select a trading candidate. Call it Best List because, believe it or not, this is the best this Market has to offer. Not my opinion, its just is... I outlined basic selection criteria in original Dart article post(link), and they proved to be absolutely valid. This Best List is remarkably small, but has to get even smaller for DARTv2.

First consideration is 'plaque of all small accounts' - costs! The commissions really add up and eat into any gains, while accentuating losses. Luckily, Best List already has a solution available - many of these stocks pay a dividend of 1.5% or more, which according to past tests more than offset costs of Standard Position Sizing. I think that to run this method in less than 20K account is not feasible, while employing multiples of this amount will effectively negate costs and increase dividend income. I estimate that portfolio will need a trade every two weeks, with expectation for a rocky start. System start is always rocky. Always!

Secondly, I don't want to buy high price/sales ratio. Generally its a recipe for disaster, because price already risen far enough for somebody to take some profits... and its never yours truly... At the same time I don't want any huge mega-caps, because I have other methods to deal with those (System12). Besides, if second objective of Dart is to hunt for companies to be bought, then its not a 100Bil behemoth - they are the ones who doing the buying... lol

I added a 'short' qualifier, based on this simple logic: Shorts are smarter than me and they are sniffing something. Short interest of more than 10-20% of the float is especially alarming, considering how financially sound these stocks look on paper. Do I really want to be on the other side of THESE GUYS trades? Don't get cute with money, son.

The above results is ALL I got. Six of these will be bought Monday, on open, all at ones, at equal size: BRCD,ADP,IILG,MSM,GPC,CMI, and the rest will stay for replacement, or until something better comes along. I made these choices in an interest of diversification, but really all ten are good to go.
http://stockcharts.com/freecharts/candleglance.html?BRCD,ADP,IILG,MSM,GPC,CMI,GNTX,BEN,SWKS,FAST|B|P5,3,3|0

Practically, there are only two ways to Start a System - you buy them all at once, or you don't. :)
Guess how I operate?
Strictly according to rational position sizing and portfolio management, as discussed in 'How to Bet' post (link), I will buy about $3000 worth of each, keeping the rest as cash reserve for future replenishment. (Trust me, these flowers will need a lot of watering).
Next update will be published in a week to ten days, so we can analyze portfolio initiation, see about changes that needs to be made and review rules for selling. Do you know 'WHY to SELL"?

Meanwhile, I remind that this is still a simulation, although set up as realistic as possible. I will host it at Investopedia
http://www.investopedia.com/simulator/portfolio/?gameid=357126

November 10, 2016. New simulator for fully synchronized DART v2:
http://www.marketwatch.com/game/dart-v2/portfolio/holdings

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New version of scan (Finviz link) is definitely something of extreme, as evident by small number of results. I am sure that somewhere between this and the original settings are a lot of great stocks that can be found and traded. Specifically, if curious learner follows scan link he may discover a small group of financial stocks. What are they doing here, I wonder. I remember back in December of 2015 I noticed another peculiar looking group of similar stocks. Go look what happened to them since... I can smell an experiment! Can you?

Wednesday, August 17, 2016

How to Bet - Guide to Position Sizing

"When you take up a sword, you must feel intent on cutting the enemy. As you cut an enemy you must not change your grip, and your hands must not "cower"." - Miyamoto Musashi, 1645

Have you ever had a situation when you buy two similar looking stocks, place the same bet ... and then see one of them go up as the other go down. The extent of both moves look pretty similar on a chart, but (o, horror) your loser is down way more than your winner is up. The scale of the chart played a trick on your eyes and got your position sizing all screwed up, my friend. There is no easy remedy for this problem, since we don't know the future and can't tell in advance how far and how fast things will move, but here are some guidelines to help along the Way.

There is a concept of 'R', popularized by Van Tharp in his own books, that simply states that you should risk the same dollar amount on each trade and adjust position size accordingly. I encourage readers to further explore this topic on their own, as I don't find it applicable to small accounts (less than 1 million), but the basic idea is valid, no doubt. Specifically, it was mathematically proven that traders should not risk more than 1% of their equity on any one trade. This way 100k account will risk $1000, and 20k account has to allow for only $200 risk per position. It’s a start, but still doesn't tell me how much to bet. I want to put out a line big enough, so the win will be meaningful; split the wad down enough, so to buy all I need; keep it modest enough, so not to blow a hole in an account. Decisions...decisions...

Let’s look at a market of stocks. There are about 2000 active tradeable stocks in the US market (price over 5, average volume over 300K). The vast majority will move 1-5% per day on average and shoot 10-30% over a period of few months, so this is what we need to be ready for. Think about it this way: if I can risk 10% to make 30%, I can lose three times, win once, and still be okay. Dollar-wise, $3000 position will win or lose $300 to $1000, which is a great news for a 100k account, because 3-4K positions size will allow me to have 25-30 positions, so I can run a diversified portfolio (which is what I want). I found that position size of less than $2000 is absolutely impractical, because costs (commissions) really cut into any profits and accentuate losses to a point of erasing any positive results into zero or worse. Therefore I decided to call $3000 (up to $4000 for less volatile stocks) my Standard Position Size and try to stick to sensible securities to avoid wipe-outs.

I don't want to lose a thousand dollars! A $3000 position has to go down $30% to lose $1000. Are you kidding me? Is this what I am doing here - losing thousands? NO WAY! Let’s agree that 30% is a catastrophic loss, from which there is no recovery (trust me - been there, done that). A rational operator should never allow such big loss to develop. As a matter of fact, I don't want to risk more than 5-7% on single position, with 10% as a meaningful pain threshold, 15% will have me cry in fetal position and 20% loss takes me out no matter what. Now I am risking 0.5% or less of my total 100k account on each trade, the pressure is off. Not one single trade can hurt me. They all are about same small risk, ready to deliver big rewards. In words of famous Ivan Krastins: "Just one of the next thousand trades."

I think the problem of under-capitalization is the #1 source of small investor’s dismal performance. This curse plagued yours truly on several occasions. There has to be a clear understanding of what is possible or feasible with $20K account, as risk limitations get quite severe. First of all, 5-7 positions of the same Standard Position Size will have a really hard time to offer much diversification. Secondly, at 10% stop loss on $3000 position we already risking more than traditional 1% of portfolio. Quite a dilemma, eh. I managed to develop several methods that can deal with smaller accounts and will publish them all in due course. There are Ways to 'cut enemy' strongly as intended, without 'cutting up' an account in a process, but of course 'more money' is the best remedy for 'no money' problem. He-he

Every portfolio, method or system I publish states clearly how much money in how many positions it needs initially and whether these assumptions were derived by tests, simulation or real world results. It is important to understand that these are minimum amounts and can be easily multiplied ten-fold without any changes to order execution. It is designed this Way for my own use. Keep in mind, that I don't give investment advice, just Show What I Do (SWID post link), so a patient reader can learn and make pragmatic decisions.

Proper betting and conservative risk management are crucial for investment success and survival. If done correctly, any one screwed up trade won't make any difference in the long run, but a wrong position sizing will burn thru a portfolio like a wildfire.

I will have more about all this in the near future.
Meanwhile, in the words of a great swordsman: "You must practice diligently in order to understand how to win". Practice...

Monday, August 15, 2016

VIDEO: S&P500 Price Movement

In this video I analyze S&P500 Price Movement for week of August 8-12, 2016, based on my Composite Score Indicator (CSI)

Friday, August 12, 2016

Loaded Gun

I am sure it will upset all two of my readers, but the first method i will reveal is still in development stage. Its far enough into this beta-test to judge results, make corrections and important observations. Most pressingly, it comes at time when my Main Account is 30%ish in cash, so I will have needed funds to allocate if/when good opportunity comes along.
Here goes nothing....

This is a test!
No real money is traded, but I keep a virtual trading account with (near) real records.

I developed Dart Strategy Portfolio method last year and published it here(link) on December 28, 2015. I myself didn't believe it could work, but it did and in more ways than one.

Test account was started on Jan 5, 2016 and immediately hit a draw-down, which wasn't unexpected for me at all. This is not a first time I was starting a multi-position dynamic system. Some very important lessons from management of System12 in simulated, then virtual and then real environment (2013-2014) came really handy this time around. I published opening allocation and first few trades here(link).

35K was invested into 10 equal size positions with little less than 10% cash leftover for replenishment. Dart method is designed to function "regardless of personal opinion and market timing", but as luck would have it, was started right into teeth of 10% January-February drop. Portfolio chewed thru 3/4 of cash reserve, until it fully recovered by beginning of March. Today it sits at over 39,000 or about double of S&P500 ytd gains. (Elephant, I'm telling you ;-)

Even more bizarre is how it got there. I didn't even try to pick which stocks to buy (it really was random), didn't worry about diversification or dividend yield. I will be first to admit that had I randomly picked some other random tickers - my results would be randomly different. No kidding. But I learned some very important things about Best List - scan for best stocks this market has to offer.

Most of Best List stocks don't react much to earnings. Really, these are solid money making enterprises and people don't expect surprises during dreaded earnings season. Size of the List doesn't change very much. It has 41 stocks in it now, many of them since last year. Inordinate amount of stocks that disappear from the List are gone because company was bought out for huge premiums. So many that I even had some randomly traded into test account, but that is beside the point.
I think other people also see these companies as prosperous and sensibly priced .
THESE people don't buy stocks, THEY buy the whole kit and caboodle.

Original strategy proposed a trade every week, which in fact happened for risk management in a beginning of the year. (Believe me, nothing gives me more pleasure than to sell a loser.) Later I encounter several periods when no trades were necessary. Everything was ripping tits higher. Why mess with perfection? Let the winners run... As a result, costs of running this method (commissions) were lower than estimated and some gains bigger than they would be otherwise.

It is possible to further dial in settings for the scan, so to deliver more focused and smaller list, that can be managed with reasonable amount of money. I started another test account to see what I can do with $20,000, if I pick 6 non-random stocks for portfolio based on Dart Strategy principles. I would do it with real money, had the market not be so high and time of the year not so treacherous. It would be instructive for future subscribers to observe what happens now, as system start is always very unpredictable. Always.

Get your guns loaded! Dart v2 will be published next Friday!

Thursday, August 11, 2016

SWID

I will begin to offer an annual subscription in near future.

It is not an advisory service.
I will grant access to a private Twitter feed, where I will post all my trades in real time. In fact, because most of orders are on-stop, it will be easy to follow and execute.
I will lay out in detail all my methods and systems, so a subscriber will fully understand basis of each decision, including risks and limitations.

I will not put all this out at-once. It would require a book or two, plus market is always moving and I strive to act with it. Please, don't think that I am constantly chasing some latest fad or pumping stocks. I do not. My investment style is based on systematic, repeatable, almost mechanical approach with healthy dose of common sense and experience. Systems I design, test and trade are NOT some cockamamie day-trading rules, but rational speculations with reasonable expectation of gain in near future. My research is ongoing and my methods constantly improve. I think there is a benefit to a regular reader of my journal - in understanding of reasoning and strategies I use, as educational material.
In other words: I can teach you to fish...

Gradually and according to market conditions, I will publish pertinent information, with hope that it will also spark a meaningful discussion in comment section.

Why am I doing this?
First of all, I am lonely. I don't know anybody in real world that I can have an intelligent conversation with, about what I want to talk about - investing and speculating in financial markets. With real money. In real life. My money is not inheritance or wild lottery win. Its savings... its not much... just like everybody else. The reason 'WHY' this money where put aside is to make them grow by investment, for future use. I make the 'future' come sooner.

Secondly, I am in business of making money in the markets. And I do. Dollar amount of profits are not that big due to relatively small base I have to work with, although percentage gains can be quite large at times. Also they don't come on any regular or predictable basis. To smooth this out (and to allow my capital to compound at faster rate) I need an additional income. So I will sell my best skill for as long as I need to. (I don't make forecasts)

I believe I possess wealth of useful information, practical experience and sensible disposition, so my knowledge can be sold for a modest sum. The only way it can work is to give subscriber an ability to
See What I Do
in real time, with real money.

It is very important to understand that I am not a RIA, not giving advice on what to do, not making recommendations, not promoting any stock, website or business. I am just a regular, average American guy, husband and father, who happened to learn alot about markets over past 15 years and found a Way to turn this knowledge into profits. Anybody can do the same or better and maybe faster, if they start where I am right know. For a reasonable fee I intend to disclose what I do, with explanation as to 'how' and 'why', so committed follower can not only imitate, but also improve. Readers are urged to not blindly follow my actions, but to observe, learn and make independent rational decisions. Do your own thinking... I try...

We will start with this blog and Twitter, add occasional video and may be LiveStream and see where it goes from here.

Wednesday, June 22, 2016

System9 Consolidated Watch List

Saturday, February 13, 2016

Anatha Bhaga

Bhaga, God of Wealth...and Love

Lord Vishnu is one of Supreme Gods of Hinduism, master of all, creator and destroyer... and he is slightly blue. (Wait, it gets better). Apart from having four hands, he also has a gang of 12 Adityas - your regular, everyday Sun-Gods. One of them is Bhaga, God of wealth, also responsible for distribution of destiny according to merits of recipient... ahem

God Bhaga maybe an obscure character, but is definitely connected linguistically to Sanskrit word 'Bhagavan', meaning 'rich and prosperous'. Further, it believed to cognate to Slavic бог ("god" /bog/); and to be an original root of Russian богатый ("wealthy" /bagatyi/). Good words do get around...

In Maharashtra state of India (central-left part of country) people speak Marathi, one of 23 official languages of India. According to Marathi-to-English dictionary (here link), the word 'Anatha' means:
either -That is without a master or protector; forlorn, friendless, destitute;
or - Friend of the friendless. Brother of the destitute; protector of the helpless.

India is such a mess.

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After paying homage to some of biggest swinging dicks of Wall Street in Guru Puja post (link), I am looking around at what I got. This lonely traveler in search of The Way is not doing too bad. There are plenty of good ideas in stocks that I follow based on various reasons, but mainly because of some common sense notions. I call this approach 'Theme Investing' aka System9. I tend to gravitate towards larger companies not just because all the action and liquidity is concentrated in these type of stocks, but also based on appearance of stability and viability of underlying enterprise. It other words there is less of a chance that these corporations are a complete fucking fraud. Mostly all of 'My Stocks' are real businesses, making tangible things or providing valuable service, and with a scale! Every ones in a while their stocks go up 10-20-30% for no special reason at-all.... just because. It happens often enough, sometimes these trends last for months, sometimes they don't happen for years. Sometimes I am wrong, or early.

In order to make money in The Market I need to answer these 4 questions:
WHAT to buy, WHEN to do it, HOW to bet, WHY to sell.

For the task of "WHEN to do it" I developed Composite Score Indicator (CSI) - my proprietary formula to quantify and qualify price action of any actively traded security. CSI is a technique to hook big, major, most explosive trends and continuously know where I am in that trend, including an ample indication when the trend is over. Composite Score Indicator does not tell the future, it can not guarantee that position will be profitable. CSI Buy Signal does not guarantee that trend will indeed develop, but every trend has at-least one Buy Signal in the beginning. It just can not be any other way.

My view of importance or prospects of a Theme is just an opinion. I have to wait and calculate my Composite Score Indicator, because there is no way to know in advance if any group of stocks or industry will become an attractive investment. Financial speculation is a process of making an aggressive monetary bet, based on incomplete assumption, for uncertain period of time. As such it is very risky, prone to misjudgment, as well as susceptible to error in forecasting. By using Theme Investing and System12 for stocks selection, CSI for trade timing and conservative position sizing - I attempt to circumvent these difficulties with reasonable expectation of gain over time. The Market rarely makes sense (and I don't think is has to), but it speaks every day... I am listening...

This Anatha is a man without Guru. Alone, but not lost. Independence is my strength. CSI is my guide.

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“I can assure you that any specific projections I write down will turn out to be wrong, perhaps markedly so.” – Janet Yellen

“If you’ve followed my forecasts, you’ve probably lost a lot of money.”
– St. Louis Fed President James Bullard