Who’s afraid of the Big Bad Correction?

Is your house made of straw?  Or sticks?  My house is brick, baby!  Today the S&P 500 fell 1.8%, but my account dropped by only 1.2%.  For the week, the benchmark index lost 0.5%, but my account gained 0.4%.  Pretty good, considering that the “sensible people” were cowering under their beds this week, waiting for the market storm to blow by.

In fairness, we actually are overdue for a correction.  Even Schwab is recommending that their customers “reduce risk” this week.  So I’ve been raising my sell-stops to only 3% below peak.  Today, I got stopped out of BAL and GBX—but my stops were so high that I still made a profit on them!

However, all is not rosy in Stockland.  I have decided to treat Dec. 20 as the day when I started my trading business, because that’s when I bought FLIR intending to sell it back soon (my previous stock purchases had no sell dates in mind).  While my account overall is up 4.5% since Oct. 25, my trades since Dec. 20 have actually lost 1.4%.  Except for the value of experience gained, I would have been better off sitting in cash!  Experience is expensive, but (as I have been telling myself all along) if you want to learn something, there is just no substitute for losing money at it.  Doing “paper trades” does not work because it doesn’t feel like anything when you lose.

The disastrous 2nd purchase of TNA cost me 2% of my entire account value, so I would be 0.6% in the black without that.  I have adjusted my trading rules so similar disasters won’t happen again, but surely other disasters will.  Excluding the 2nd TNA and both DRR purchases, my buys since Dec. 20 would have gained me 1.3%, which is only 0.05%/day or maybe 11%/year.  And these results were obtained during December and January’s “raging-bull market”; the rest of the year probably won’t be quite so amenable to making easy money, so I’ll have to get smarter somehow.

	Date		Gain/day
Symbol	Bought	Sold	Thurs.	Fri.	Stop
GGG	Jan. 20	n/a	+0.45%	+0.42%	+0.11%
OKE	Jan. 21	Jan. 26	+0.01%	+0.03%	−0.83%
BAL	Jan. 25	Jan. 28	+1.59%	+0.40%	+0.55%
GBX	Jan. 25	Jan. 28	+1.91%	+0.75%	+0.85%
SE	Jan. 26	n/a	+0.36%	−0.21%	−0.60%
BAGL	Jan. 26	n/a	−0.74%	−0.50%	−0.80%
FLIR	Jan. 27	n/a	+0.59%	−0.28%	−0.69%

The table at left includes stocks purchased since Dec. 20 that I still had sometime during this week.  (TD is not shown because I bought it in Oct.)  For yet-unsold stocks, the “Thurs.” and “Fri.” gains are what I would have gotten had I sold at those day’s closing prices—but I didn’t sell so I won’t get those.  The “Stop” gain is what I would get if the sell-stop gets triggered on Monday.  The stops for the last three purchases are still under water and of course I couldn’t raise them today.  Hopefully Monday will be an “up” day, but there’s no way to know.

The figure at right shows how the account is divided.  DRETF, FLIR, and OKE are 6%, cash is 7%, while the others are 11%.  “T+0” means it was sold today, so the money will rejoin cash next Wednesday; “T+1” was sold yesterday and will be cash on Tuesday; “T+2” was sold Wednesday and will be reinvestable come Monday.

For now my only plans for Monday are to buy more DRETF, because Monday is when the ban on Americans buying that stock is supposed to be lifted.  You see, Dundee REIT announced the issuance of new stock in Nov., which was closed Dec. 21 and was fully oversubscribed (meaning that more dollars wanted to buy their way into that company than its management was willing to accept).  On Jan. 18, they cheekily announced another stock offering.  Once again, this offering is for Canadians only, so Americans are not allowed to buy *any* Dundee REIT stock until the end of the month.  The newly offered stock will sell for $30.30.  Right now the stock chart shows a “triangle wave” where the lows keep getting higher but the highs are stuck at $30.30 because no one wants to pay more than that until February.  The triangle wave is generally a sign that the stock will go up soon.

Who’s afraid of the big bad wolf, the big bad wolf, the big bad wolf?  We ain’t afraid y’all, we ain't afraid of you!