December Answers: What’s Going On with DB, Gold, and More

Thanks for the overwhelming number of great, thoughtful comments left on our Open Thread over the weekend!

As always, it was hard to pick “winners,” but some of the ones I chose include…

  • What’s going on with DB right now? What about my puts?
  • Are we still going to have a crisis? When?
  • Why is gold going down?

A number of Zenith Trading Circle members also asked specific questions about the service and about our current trades. I kept those questions private, but I want to answer them too – though of course, I can’t do it in Sure Money. Zenith members, stay tuned – I’ll have a special Q&A for you next week.

Also, don’t forget – I’ll have a complete and thorough analysis of the broader markets in my 2017 Forecast, which I’ll release to Sure Money in early January.

Without further ado, then, here are some of your best questions (and my best shot at answering them).

To continue reading click here.

This Rally Makes Me Sick to My Stomach – But I’m Done Fighting It

The bulls are running on Wall Street as a sharp shift in post-election market psychology has them chasing what they pray isn’t their own tails.  The Dow Jones Industrial Average rallied 3.06% last week to a near all-time high of 19756.85, stirring talk of Dow 20,000 by year end. The much broader S&P 500 also jumped 3.08% to a near-record 2259.53 while the Nasdaq Composite Index rose 3.59% to 5444.40.  Virtually every sector with the exception of bond-proxy utilities participated fully in the rally as investors acted as though President-elect Donald Trump has already made America great again.  If it were only that easy.

This rally has many of the earmarks of a blow-off driven by emotion rather than economic fundamentals.  Emotional rallies tend to move parabolically because they are ruled by the heart rather than the mind.  Think about your own emotions and you will understand this rally much better than if you try to rationalize it.  Emotions run at the edges and do not know moderation (if you do not have wildly strong feelings about your partner, for example, that person probably shouldn’t be your partner).  Feelings like love and anger are extreme, which is why they are difficult to control and tend to lead people to make poor (often tragically poor) life decisions.  The same is true when emotions affect investing.  The hardest thing to do as an investor is to resist your emotions.

I spent most of last week sick to my stomach because my head told me there was little economic rationale for the rally at the same time it told me there was a strong psychological and emotional basis for it to continue.  Unfortunately, since my hedge fund invests based on systems that remove emotions from the equation, we lost a little money (which made my stomach hurt worse because I am a perfectionist) but I’m disciplined enough not to override the systems but to take the pain.  But a market driven by emotions is bound to overshoot and that is what I expect to happen here. But until it does, I’m feeling pretty aggravated.  Then again, this should be the worst thing that ever happens to me, right?  Part of keeping emotional balance is learning how to maintain perspective.

And part of maintaining perspective is adjusting your strategy to make money no matter what happens.

So forget feelings.

As of today, I’m changing my gameplan…

To continue reading click here.

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