Monthly Archives: November 2023
Financial Proverbs
Many sites & news articles are filled with old proverbs & quotes.
Some are easy to take for granted, or at face value. Some perhaps are well intentioned scams that don’t work irl, or do not have statistical backing. Some are proven safe but doesn’t match one’s specific goals, context & investing timeframe.
“Buy and hold” “HODL”
It’s on every site, every video & courses all about financial planning. I’ve done the research, read news, checked valuations, performance metrics, and chose companies accordingly. Then keep for years or forever, not look at it or check it’s value. The recommendation is by not checking, you avoid the possible mistake of exiting at a huge loss, or miss years of gains. Long term investing, very Warren Buffett styled. But the fact is most hedge funds, large investors & Berkshire buy & sell many stocks each quarter. It’s the same as HODLing.
I accepted this as truth from popular consensus, until it wrecked my account. From the valuations at the time of entry, many companies had great numbers for their respective industries. Amazon AMZN, Canopy CGC, AT&T T, Paypal PYPL etc.
It wasn’t caused by any one unlucky buy timing, as I did the DCA thing the gurus all recommend spread over some time. To be fair I didn’t try the regular buy $x per week/month, since not everyone has funds just trickling down.
Take AMZN, suppose all the DCA gave you breakeven roughly at the red level on this chart below. The fundamentals was and still makes up a great revenue generating company. But it sure is frustrating always holding a loss. And if one checked would find only 3 days in nearly 2 years to exit at near breakeven. This locks up dead capital waiting for the next peak, just to fall back into a losing multi valley pattern and lower base. There’s 0 dividend, just an assumption that it should rise in time. Company changes, or market forces will all challenge this assumption. They say timing the market is a lost cause, but it’ll likely have helped better entry & exit for a volatile chart as this.
CGC was one of the best grassy stocks. But it didn’t matter. Most of these stocks are -99% down. It’s certainly a popular HODL stock.
AT&T in hindsight, was an obvious value trap. At least this gives dividends upward of 7% yield now.
PYPL the valuations, cashflow, customer count are all better vs before. But its valuations don’t matter. Interest rates & market forces decide fintech are unwanted so it’s -80% from peak.
“Fundamental analysis is better than technical analysis” “technical analysis is like astrology”
Deep value investing vs trendline entry which is the bigger scam? A company can have great undervalued numbers. But an important truth is the market can dislike certain sectors/companies longer than one’s lifetime. “Eventually price will normalize to its valuations”, “Eventually traders will notice the company,” these are hopes of a market efficiency that might not exist.
If you think combining fundamentals & technicals will save an investment/trade, it’s not that simple. Companies with nice uptrends and good fundamentals can instantly tank 26.5% in one earnings day, like Fortinet FTNT and many retailers like Dollar General DG or Wayfair W.
Some technical analysis are just arbitrary lines & shapes, while some have statistical basis. Markets aren’t all random. The most obvious trends & structures exist because institutions, hedgefunds & retailers all learned these, and are aware of how to trade a head & shoulders, a wedge pattern etc. These big “believers” will trade accordingly, and that capital will move the price accordingly, strengthening & reinforcing the belief of each pattern.
“DCA is the way”
Besides the AMZN case, DCA is a decent strategy in general, but blind DCA is not. Later found some youtubers suggest more nuanced strategies. Research fundamentals to choose good companies. Research technicals to find a good entry point. Continue checking both fundamentals & technicals in case anything changes. Only then DCA add in when all metrics look good. Basic DCA is buy like $10 each time, of however many fractional shares. Some suggest growing the buy the deeper it falls, maybe start $10, after a 5 point fall buy $20, another 5 point fall buy $40. Some suggest never DCA down, only DCA upward. This sounds good, as the idea is “don’t pile onto losers”, and you only add to uptrending winners. But that likely ends up buying at all time highs, so I’m not sure of that strategy yet.
“Price action is better than any indicators which are all lagging”
The info from candlesticks and curves/indicators is a snapshot record of the same timeline. They are just transformed, simplified & presented in different manners.
I’ve tried some price action candlestick strategies and they mostly fail. Trying to strictly identify some insidebar engulfing red/green patterns, an exact NR7, or Hikkake, by the time one checks all bars match the move is already gone, and bars are too noisy & stock specific. An article backtested a certain candle pattern only works on 15 & 30 minute timeframes, and not others, which unfortunately can’t work for many traders/investors.
SMAs may look laggy, but it’s averaging the same data, and presenting a simplified average view vs candles. A candle simplifies all the sub data in a timeframe into 4 values. Some prefer line chart which simplifies the 4 values into 1 point of the line.
Haven’t figured out a proper strategy, but it seems a combo of fundamentals, technicals & nuanced DCA might be a good start. The rest is simply to try.
Halloween
Happy halloween found these fun treats.
From some storage found these pair well together, crowned black cat & crowned ghost.
Cat from Aimer noir CD. Still need to get a cd player to play this some day.
Ghost from Rain Code Switch game.
EV & ute changes
Saw a news. Seems like it still need them all to vote and go through revisions, so too early to tell.
Other countries have an isolated EV rebate. Here it ties higher pollution vehicles like utes to EVs. It might’ve created a conflict between more suburb/farm/tradie ute drivers vs city EV drivers. Separating the two fee/rebate sounds safer to get support.
December they plan to remove that ute fee, remove the EV rebate, while focus on adding EV charging stations. With all these changes, it’s unclear if the aggregate will cost less or more, and how it affects EV adoption rate.
Inflation in high cost of living is another issue. Where the future parties might reduce vehicle subsidies to focus on cost cutting & reduce inflation, which would help more people than the two vehicle types.
gophercg.log 