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INM Nov '08 - Lessons Must Be Learned Or It Won't Get Any Easier
Kenneth J. Gruneisen, Founder and Contributing Writer, www.CANSLIM.net
A review of prior issues can help solidify the facts and educational lessons contained in Investing For The New Millennium (INM) this year. The goal remains to get above average returns, but too many investors are having trouble reaching that goal. This is why I hope it will prove beneficial for investors to take time and look back over this tumultuous period, refreshing ourselves on the details that might otherwise be forgotten. This is for those without a photographic memory or better ability to recall the topics INM has covered in 2008.
The October issue's headline "Smart Asset Allocation Tactic - Go To Cash During Bad Markets" did a decent job of reminding investors that non-participation was an option. Some readers took action to protect themselves and were among the intelligent few earning safe interest during the worst October loss in 21 years. Prior to that, the September issue went into the detail of pinpointing specific levels for the major averages, points to watch for technical indications of what might be a meaningful change market direction. When investors watching for a market upturn or downturn saw the S&P 500 Index's prior chart low of 1,200 (mentioned in that INM issue) undercut later, they had clear technical evidence of the continuing bear market. Some ignored that definitive sign of a deteriorating market, to their peril.
In the August issue the message was simple: follow the rules, don't cheat, and don't guess or make exceptions unless you have built up a profit cusion and already mastered the basics. This was partly inspired by my presentations and personal interaction with people at the Meet Ups. The July issue also got personal, pointing out that I care for clients deeply, like family, especially when big fortunes and lifestyle changing decisions are involved. Looking beyond the individuals and ordinary "Joe the plumber" types, heartfelt concern was also shown for large institutional investors who had been ignoring clear sell signals in Motorola (MOT) too. Incidentally, the number of top-rated funds owning an interest in MOT shares fell from 457 in September '07 down to just 304 as of June '08. It might also be worthy of mention that the stock has traded down as much as -45.5% lower since the July 2008 issue of INM was published - showing two annotated graphs of its ongoing deterioration!
In June we observed that many investment firms were dealing with outflows, yet our team at Source Capital Group in Lighthouse Point was actually growing its assets under management. Not much has changed on the surface during our 11+ years at the same address and phone number, however that lack of change under-states the extent of the many successes we have enjoyed. To go the extra mile in making myself accessible, this was also the issue where I gave everyone my cell phone number. Thus far, it has gone completely unused by INM readers, for the record. Of course, the first place to try me during market hours is at my office, but I went this extra step to make sure and do my best to be reachable in the most critical times.
May's INM said it is not ridiculous to have expectations better than Ben Stein. However, it acknowledged the challenging environment (Bear Stearns Cos' bailout) as a smart time to re-evalute your positions as investors. Greg Morris was metioned, based on an interview by Bloomberg that noted his performance in the top 97% of fund managers. His simple, matter of fact explanation was that technical models are critically important - and they are proven.
The April issue told the story of the "Devil's Tool Sale", and the important theme was to preserve capital and avoid getting discouraged. The advance/decline line was again revisited, and based on it and other factors, odds were still looking bad for investors. After every great disaster, the flaws or weaknesses (that always existed) jump out as rather obvious. A comparison to the thoroughly investigated sinking of the Titanic was drawn in the March issue - pointing out that "Titanic Losses Are No Accident."
In the February INM it was said, "Handing out 'free money' that they don’t even have is very likely to be a recipe for an even bigger financial disaster later." The Fed had just taken very swift and drastic action by aggressively cutting interest rates. I was then being critical of a stimulus package being talked about in Washington.
My New Year's resolution was to spend less time in the office in 2008, but the January issue of INM pointed out that I had not retired. 2008 was destined to be a year where more of the people I previously considered to be competition (for the first 20 years of my career) became clients. Investment managers have been invited to do business through sub-advisor arrangements with Source Capital - specifically designed to give institutional investors the much needed support required by active managers.
The worst start of any year in the 80 year history of the S&P 500 Index prompted a "Special Educational Article" on January 29, 2008 (read here). This article took a look at drastic breakdowns occurring in several popular stocks. The point that "weak stocks tend to get weaker" has been re-emphasized by what has followed. We talked about Citigroup (C) which had fallen -50% from its peak and then traded as low as $22. Since then it fell -50% again, trading as low as the $11 area recently. Intel Corp (INTC) had fallen -35% in less than 2 months to the $18 area then, and it fell near $13 recently. Garmin Ltd (GRMN) was then -56% from its October '07 peak (coinciding the the major averages' peak). GRMN was then hitting $55, and it fell near $20 recently. Google Inc (GOOG) was down from its $747 high and then breaking under the $500 threshold. It fell to $310 recently. The less popular ININ - which had been crushed after its CANSLIM.net News December '07 appearance, falling from around $30 to $11, fell to $6 since then.
In 1996, the year CANSLIM.net was started, I met John Murphy and Greg Morris at the Chicago Money Show. They impressed upon me the importance of being able to read charts, which I was already starting to recognize. It is NOT by accident, luck, or coincidence that Greg Morris is now at the top of a list of 10,000 fund managers. You may still be able to watch last week's CNBC interview via this link -> http://www.cnbc.com/id/15840232?video=911353426 He does not ever make any guesses, he does not get emotional, he simply uses charts and lets the market dictate his actions. SMART MAN!
Kenneth J. Gruneisen, Founder and Contributing Writer, www.CANSLIM.net :
Kenneth J. Gruneisen has successfully completed the CAN SLIM® Certification Program. Mr. Gruneisen became a Registered Representative in 1987 and his career includes experience offering personalized assistance to investors with more than a decade of experience as a Registered Principal managing a branch office.
The recommendations made by CAN SLIM® certified individuals are their own and may not be attributed to the CAN SLIM® Certification Program, William O'Neil & Co., Investor's Business Daily or their affiliates. The CAN SLIM® Certification indicates only that the individual has successfully completed the CAN SLIM® Certification Program. CAN SLIM®, William O'Neil & Co., Investor's Business Daily and any of their affiliates are in no way responsible for any loss or damage caused as a result of the services provided by these individuals.