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Navigating Thru a Trading Fiasco

Two weeks ago the Canadian government announced that it was imposing a new tax on income trusts.  This announcement shocked the market and sent the Toronto Stock Exchange S&P/TSX composite index spiraling down 2.4% for the day.  To put that in US terms that was the equivalent to a 300 point drop in the DOW.  Billions of dollars were lost by this announcement.

Unfortunately I had recently taken a position in Enerplus Resources (ERF) the granddaddy of income trusts.  It was the first Canadian oil and gas trust formed in 1986.  Over the past five years, while the DOW was returning peanuts, its return was over 200%.  It has a 9% yield and pays a monthly dividend like clock work.  The plan was for it to become the anchor stock in an income oriented portfolio that I am building.  As I have mentioned numerous times, to be successful in this market you need to be either a trader or a dollar-cost averager.  Most will be far more successful as a dollar-cost averager.  I have written many articles on the topic on this site.  I make use both styles, but primarily I am a trader. 

On the day of the announcement, ERF dropped 14%.  That might have been the largest one day drop that I have experienced in a stock.  If it is not the largest – it is definitely in the top two or three.  Here are the comments from one mutual fund manager, “There is a knee-jerk reaction out there. You got a lot of mutual funds that might be experiencing cash-ins because the media headlines make the masses want to liquidate at whatever the cost.”  Based on his comments, I would presume that he was advising his clients not to sell.  I have been caught in downdrafts such as this before.  So, I was a seller.  Continue reading “Navigating Thru a Trading Fiasco”

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Trading Without a Mentor is Like Flying Blind

Bill Gates, the richest man in the world, often talks about his mentor Warren Buffet, who just happens to be the world’s most successful investor.  It is well documented that Buffet was mentored by famed investor Benjamin Graham who is known as the father of value investing.  Many businesses have formal mentor programs as its benefits have been proven over and over.  Successful people often mention that a prime reason of their achievement was having a mentor.  So, if the Gates and the Buffets of world have mentors, so shouldn’t you have one?  I would like to suggest that trading without a mentor is like flying blind. Continue reading “Trading Without a Mentor is Like Flying Blind”

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Trading Style Discussion & Silver Wheaton: The Best Silver Play in Town

My trading style is a work in progress that continues to evolve over time.  As I discover a weaknesses, I put strategies in place to address the issues.  The following is a problem that would drive me nuts.  After I would sell a stock and move on to the next hot one, unintentionally I would forget about the one just sold.  At some point in the future, I would check its price.  Often it would be higher, sometimes much higher than the price it had been sold.   Some would say that I should not have sold it in the first place.  Maybe I shouldn’t have.  Maybe I should have.  I believe that the mistake was not in selling the stock, but in not buying it back. 

I didn’t buy it back, because maybe it was a health care stock and now I am into consumer stocks or maybe it was a large cap and now I am into small caps.  There are literally thousands of stocks available and it is very easy to get distracted.  To address this issue, I have reduced my stock universe to around 30 stocks.  Occasionally a new one will be added and an old one will get the boot.  Some of the stocks I trade as a basket, so in reality my universe is probably closer to 15 stocks.  I have also narrowed my focus to primarily commodity stocks and a couple of tech ETFs.  This has many benefits, but mostly it allows me to really learn a sector and how it trades.  It also reduces the probability of missing a run in a stock that was recently sold.  Continue reading “Trading Style Discussion & Silver Wheaton: The Best Silver Play in Town”