I watch both the Oil & Natural Gas market very closely.  These commodity markets provide an interesting reflection of investor sociology and psychology.   Continue reading this post…

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• At the local country fair on Sunday my son wanted to play Skee ball, a game of skill.  With $0.50 in hand he had to wait 15 minutes for the family in from of him to finish their turn.  As he patiently waited, a large line formed behind him with kids eager to try their hand at winning the ’small prize’ (foreign built stuffed snake).Finally his turn to roll 6 balls into the rings.  With a steady hand and laser-like focus he lined up and … was bumped by the kid behind his during his backswing.  Oops, 10 points.  Only 170 to go.  A little shuffle of the feet and another toss with another little bump.  The third time this happened (with only 30 points gained along the quest for 180) he said “can you move back” in a quiet voice while looking at the ball in his hand.  Predictably, the next three throws were also altered by a little pressure from the crowd.  

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• Buying and selling stocks and bonds seems simple enough.  Just place an order with your friendly neighborhood brokerage and you’re either In or Out.  Unfortunately, human nature dictates that most of us seek a bargain even to the point that reality is temporarily brushed aside.  Take for example the observation that many people will drive to the gas station with the lowest price even if it is across town, just for a better deal.  There must be some psychological benefit derived by this as most of the facts are ignored.  Not only are you wasting a little gas getting there but what about your time.  Time is one thing you can never get back.  The 24 hour cheque we get at the start of each day must be spent - there is no option to save.  Something few people pay attention to is the real downside risk of driving a distance for a fill.  I am referring to the risk of just being in your car on busy streets.  Road accidents kill about 1.2 million people each year worldwide and injure many (~40 times) more.  Just think of the annoyance of having to get your bumper fixed, again time and money.  Opportunity lost.

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• What a market we are experiencing right now.  In Canada the Big Banks are releasing their 3rd quarter results and so far both BMO and BNS have missed expectations - never a good thing.  Unfortunately, their stock prices have yet to revisit the lows of July 15th.  

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In medicine any new investigation/test is compared against a existing ‘Gold Standard’ test which evaluates a disease. For example in the case of pulmonary embolism (blood clot in lungs) the current Gold Standard is a Pulmonary Angiogram (PA) in which opaque dye is injected into the blood vessels of the lungs to show blockages by the blood clots. Any subsequent test is thus compared to the Specificity (ability to determine people without the disease) and Sensitivity (ability to determine people with the disease). Regarding pulmonary embolism, it seems that a High Resolution, Helical CT Angiography (CTA) scan may have better diagnostic results.

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As active investors, we tend to spend considerable time and energy researching when to Buy stocks but not nearly as much effort is spent deciding when to Sell. Sure we may be contrarian ‘Buy and Hold’ investors with the idealized holding period of Buffett but really companies change and so should our view of them as investments. Paper profits are great as ‘unrealized capital gains’ but there may be a time to sell even our best stocks. Even the great Ben Graham had a formula to sell and would do so when either 1) 50% gain 2) no later then the end of the second calendar year after buying. I do not fully agree with his criteria especially the short holding period but this strategy does make the profit real.

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It’s 2008! Do you know where your net worth is?

I calculate our family Net Worth every year during tax season as I am thinking about money, fretting about taxes and have all of the documents ?handy.

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Stocks have hit new lows as expected.

This is especially true of financial stocks with shareholders becoming increasingly uncomfortable with the pulverization of their stocks. Many of these companies have been massive blue chips with consistent dividend growth - this has all changed now as market cap and dividends have been cut.  Investors are acting like a long-tailed cat in a room full of rocking chairs!

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Our attitudes and thoughts about life often reflect our fundamental, instinctual positioning regarding resources. The resources I am referring to can be anything in life such as food, money, partners or even luck.

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As you know, we live in a nice city on the west coast of North America and as in most temperate areas we have a transient and homeless population. These people can generally survive here because of the mild climate. I have noticed two very different money-making approaches: Active and Passive.

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