Friday, January 8, 2010

The Kirk Report

The Kirk Report

Surprise, Surprise!

Posted: 08 Jan 2010 09:43 AM PST

Every year has its fair share of surprises for investors. This year will be no different than the rest in spite of all of the savvy predictions you've already heard and will soon hear this month. After all, that's what makes the market so interesting and fun to follow.

Also, if everyone already knew what was going to happen this year, it would be quite a boring year and unprofitable. We make the most amount of money in the shortest period of time as investors and traders when the vast majority of people are leaning the wrong way as they were back in March of 2009. The same will hold true in the year ahead as it has every single year in the market.

In the year-end membership survey, I asked the following question: "What has surprised you the most about the markets in 2009?" Here are a few of my personal favorites of those I received:

  • How low it could go and how fast it could come back

  • The relentless upside since March

  • The quick turnaround with no retest of the lows

  • I did not expect the rally to go on like forever

  • The significance and non-coincidence of 666 being the market bottom

  • How the markets are so detached from the realities of the business cycle

  • No one at banks and Wall Street seem to know (or care) how bad it really is out there

  • Dollar getting shafted

  • The rising popularity of quant programs

  • Interest rates way too low

  • How the market continues to rise on lower volume

  • That trading volume is not being depicted accurately

  • The strong correlation between all markets

  • Nothing is safe

  • How easily our government folded to the whims of Wall Street

  • The wide divergence of opinions from respected people

  • How unbelievably under valued some companies can become in times of an emotional sell off

  • Program trading machines running amok with my tax dollars

  • How technical patterns in the major indexes can fail (like H&S pattern in mid-summer)

  • It's business as usual - even a severe crisis was not enough for meaningful positive change

  • The extreme optimism of professionals who invest other people's money

  • The persistent negative undertones of this market

  • The large amount of negative press and doom and gloom prevalent even as the markets truly shoot upward

  • A bullish continuation when everyone is jumping to anticipate the reversal

  • How stocks on the verge of bankruptcy quickly found their footing and lead the market in the rally

  • How the market can rally with banks insolvent

  • The amount of liquidity the Federal Government threw at the problem

  • Liquidity provided by the government surpasses everything else

  • That Mr. Market fooled the majority

  • How greed can get the best of us

  • How banks can sell diversification and don't follow their own advice

  • The total escape from accountability of those who caused the crisis

  • The feast or famine mentality, boom or bust, strong down, strong up. The manic behavior of the market

  • Most surprised by the complete randomness and irrationality of markets

  • I am most surprised by the herd mentality of so many traders who I assume are professionals. They all sold when times were bad, and they all buy when things are looking better

  • The large amount of toxic assets held by Wall Street banks who are supposedly the best investors in the world

  • How cheap stocks were back in March

  • How every "expert" and everyone else has been calling for a double dip, yet it hasn't happened

  • I'm surprised how close 2009 resembled 2003

  • That inflation would stay in check

  • The sell off in oil

  • The number of secondary offerings has been astounding and with positive market acceptance

  • Any person could have bought a stock in March and could have made a profit

  • I have not found a screen that works well in down markets

  • I'm surprised by how quickly people forget

  • The market is rigged much more than I thought

  • The depth of corruption on Wall Street

  • How challenging it can be to trade gold

  • The low prices of many preferred stocks in March

  • Everyone is right and everyone is wrong

  • How I was able to overcome my fear and negativity and trade the rally profitably

  • How I missed this #$(@ing rally!

  • When the moment came, I was surprised I actually faced my fears and took the hard trade

  • The overwhelming fear I had that prevented me from buying when you were

  • That I was able to recover all of my losses from 2008

  • How much success a simple moving average cross over strategy, with a reasonable ATR stop continues to perform on most long ETFs

  • How much money I made in 2009 by doing what you teach us to do every day

There's a good reason why some have said that the stock market is the best drama on Earth. As I've written here before, my rule when dealing with the market is quite simple: expect the best, plan for the worst, and prepare to be surprised!