Friday 28 October 2011

Picking shares

Trading is all about state of mind. I make no bones about the fact that I have had a terrible year and have lost a lot of money. It was just not my type of market. Despite this I could not leave it alone and I lost. I was chasing price movements. Taking positions too late and holding on to losing positions too long. Then realising losses just as the market turned. I was reading the market correctly but I was trading badly. Luckily for me I have faith and continue to try to learn about how to make money in such unfavourable conditions. I need to because those conditions could easily return.

But now conditions have changed. We are back in my kind of market and in just a few days I have made back well over half of my losses.

At heart I am a share picker and the table shows what share picking can achieve. You can see the shares I bought, the date on which I bought them and the percentage profit, after costs, that they have generated. Most have been held for a week or less. The first batch are US shares and the second UK. The performance of the latter is nothing like so spectacular because the UK market moves more slowly.

I have bought some Honk Kong shares too but I only bought them last night they have not yet had time to cook. I bought the following shares: 88 712 571 4 17 and 903. (HK shares have numbers as codes).

But now I start to worry about protecting my profits. Making a return of 60% on a share in a week is brilliant but I begin to wonder when other buyers will start to take profit. Same is true of all the high return positions. Perhaps a little turnover in holdings is needed.

And then there is the market risk. A long solid upward run like the one we have just had is bound to have pull backs. I have no way to tell when a pull back is part of the rising trend and when it signals the beginning of the end. You see what I mean about state of mind. Worry on the way down, worry on the way up. My decision to change tack will be made on a whim. I am not bound by a system. And that, I believe, is how I win in the end. I have never heard a systems player admit to what their return on capital is. I would dearly like to know. Because if they are doing better than I am I will try their system and leave behind all anxiety.

I have repurchase gold and silver. I started to read Boomerang: the Meltdown Tour by Michael Lewis and began to feel very queasy. He talks about disaster waiting to happen inside the world's national banks. It reminded me why I was holding all that gold.

Today has been a sad day. My father has had Alzheimer's disease for the last 14 years. For most of that time he has been cared for by my exceptionally patient and loving step-mother. For the last few months he has moved into a home where the care is exemplary. I went to visit him today. It is disheartening watching human wreckage. Men and women who have lived rich and full lives reduced to sitting staring into space unable to do even the most mundane things for themselves. My father feeds himself and has a huge enthusiasm for his food. I played a game of chess with him. His recollection of the moves is still there but only just. It passes the time.

At the last minute I decided to take profits on the three highest performing shares and hold onto the cash until it is clear that the market continues upward.

Portfolio structure is now: precious metals 16%, Commodities 5%, equities 52%, cash 27%.

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