Vad's Best Ideas

The day started with what are seemingly terrible news of more troubles in the credit field, DOW has dropped 350 points but most of my trades today worked it back into the black before the close...The fund loaded with a bunch of sub prime lenders which according to Cramer are all going bankrupt closed in black, Booya 

However difficult it might be for us to stay calm and rational when everyone around us is kicking and screaming, I think that the most important thing that the investor can do is keep emotions out of the decision making process. On some days I just take my coffee mug and several pieces of dark Venezuelan chocolate (yeah I know we shouldn't support them- but their chocolate is by far the best out there) and go outside for an hour or so with some print outs of the latest 10Qs and press releases of my picks- being calm rules!!! -I've learned it when studying for my Level III CFA exam :))...

P.S. Jim Cramer some days is sooo annoying it's not even funny. I've noticed that after he comes on too strong on a particular pick or a sector after the several days of euphoria/overreaction, stock/sector usually ends up way below his recommended target...I wonder if someone actually keeps track of his all his most touted picks and confronts him with the results. Is he dead wrong on the lenders now? - I hope so 

Here is what Wiki has to say about what I refer to as "Cramer's effect"

"One characteristic of overreaction is that the average return of asset prices following a series of announcements of good news is lower than the average return following a series of bad announcements. In other words, overreaction occurs if the market reacts too strongly or for too long (persistent trend) to news that it subsequently needs to be compensated in the opposite direction. As a result, assets that were winners in the past should not be seen as an indication to invest in as their risk adjusted returns in the future are relatively low compared to stocks that were defined as losers in the past."

Go sub prime :) I need to get into the Top 5
Cheers,
Vad

Comments: View Comments |  Thursday August 9, 2007