Locking In the Gains of 1H 2009

I sold all of my stock holdings this week since my instincts tell me the market has decided to take a breather. The major indexes were down more that one percent two days in a row recently. (although on tame volume) The market has had a nice run up since mid-March, it's about time for it to digest its gains.

Here's how I did in this period: Shanda Interactive (SNDA) +24%, Net Ease (NTES) +34%, Chanyou (CYOU) +72%. (you read that right, seventy-two percent)

I'm half tempted to dig into my savings, fire my employer, and strike out on my own to seek fame and fortune. But I've gained just enough maturity to realize this would be a reaction based on the hubris of my recent market success. That success is about five percent due to my brains, ten percent due to my bravery in the shadow of difficult economic times, and eighty-five percent due to the fact that a rising tide raises all boats. The key was to get into the market when I did and let it do the magic it does when it is in an upswing. The brains part was noticing that Asian gaming stocks were some of the darlings of the spring rally.

Hubris-avoidance aside, I'm enjoying my day job. I look forward to the process of developing the online game that my team is creating. I intend to achieve the kind of satisfaction that only comes from collaborating with others to accomplish a challenging goal. It is not without relevance that the salary I'm drawing will help me save up additional capital so that I'm better prepared for my eventual - inevitable - enterpreneurial siezure. (as Michael Gerber calls it in his famous "E-Myth" books

Remebering June 4, 1989

Twenty years ago this week, hundreds of Chinese pro-democracy student demonstrators paid the ultimate price for their courage to stand up against the corruption and repression of their government. I haven't often reflected on the events of that magical summer which heralded the end of world Communism. But all it took was a photo in the news this week of that solitary Chinese student standing peacefully yet defiantly in front of a column of tanks to bring back a rush of deep emotions. My guts wrenched, my lungs heaved, my tears flowed, and I was 21 again - full of idealism and belief in the ultimate triumph of what is good. Connected, in some mysterious way, with my brothers and sisters from that time in Warsaw, and Bucharest, and East Berlin, and Beijing, and Moscow.

It is, frankly, irrelevant to ask whether the Tianenman Square massacre "accomplished" anything useful. Pundits will debate whether or not it was a wake-up call to the leadership of the Chinese communist party, or whether it helped lead to the years of economic prosperity that many more Chinese citizens now enjoy. What it means to me is that our species occasionally surprises itself in bright, shining moments when nothing matters to us more than the freedom of the human spirit. We cast off the conniving, calculating, resignation we feign (in order to "get by" in modern society) for something far greater and worthier. We put everything the world has told us is valuable at risk in order to win a prize that is impossible to justify or even quantify with mere numbers or arguments.

As Jim Reeves used to sing, "Life goes on and this old world just keeps on turning." There are jobs to do and spouses to love and kids to raise and bills to pay. These incredible events rise and fall and rise again when they are called for. But I was quite surprised by how viscerally and profoundly I could feel the emotions of my 21 year-old self. Perhaps you will experience this some day. When you do, do yourself a favor and feel it fully. Let the tears flow and the lungs heave. It is good practice for keeping the human spirit free.

Taking My Measly 17% Gain

One of the Asian gaming stocks I bought at the end of March was up 30% two days ago. Yesterday, however, a sell-off occurred and almost half of that paper profit vanished.

I watched the stock intermittently through the day as I was working. Near the end of the trading session, I had a decision to make: should I sell it? (to lock in the 17% gain that remained) or hold on to it? (hoping for a recovery in the future) It was an especially tough call to make because the trading volume was essentially equal to the previous day's volume. If the volume had been lower, that would have indicated more clearly to stay in the stock. If it had been higher, indicating a "distribution" day, that would have indicated more clearly to get out.

4:00 PM drew ever closer. The volume was neck-and-neck - how to make the call? Well, I had recently listened to a podcast interview by Bill O'Neil on investors.com. He had made a casual comment about having good sell rules that stuck with me. He said, "Stocks are kind of like people, when they act strange there's usually something wrong at a deeper level." Dropping 13% in a day, even on equivalent volume to the previous day, qualifies as acting "strange" in my book.

At 3:56 PM, I sold my shares and confirmed that the order had gone through. 17% locked in. I slept well last night.

As these things sometimes go, the stock rallied this morning. It is up to what would be a 24% gain if I hadn't sold it. Due to the rules of trading in this account, I can't just buy back the shares I sold - three business days have to pass for my sell order from yesterday to clear the system. Did I get "shaken out"? Was I hornswaggled and bamboozled by superior market operators who manipulated me into doing what I shouldn't have done?

Nah. I'm just a lucky mug who got to enjoy what would be the ride of a lifetime for most people - a 17% stock market gain in two weeks' time. Can you see me grinning like the Cheshire Cat? That's my sad face for the profits I "lost".

Everybody - Back Into The Pool!

"People fear when they should hope and hope when they should fear." -Jesse Livermore

If you have investment money that you've pulled into cash or a money market account, consider putting it back at risk in the stock market. If you don't want to follow individual stocks, you could consider a no-load S&P 500 index mutual fund available through low-cost online brokers such as TD Ameritrade or Scottrade.

Stocks are now in a bull market and have been for about 3 weeks. This is not hyperbole, the fact is that the major market indexes have been climbing higher for the past 3 weeks. They have all crossed above their critical support lines (50 day moving average) and stayed above them with conviction. The past 10 trading days have been marked by the indexes rising on higher volume and falling on lower volume.

As I wrote in this article, it is very easy to miss what is happening today - now - due to fact that our news sources always lag truly current events. Pundits and analysts are still busy trying to decide which industry sector or government bureaucracy holds greater blame for last year's problems. (or greater credit for its triumphs)

I'm asking you not to get caught up in all that. Consider this an inviting you to take a closer look at the data for yourself, along with me, and make the decisions you may have delegated to others in the past. If you lost money in the recent bear market, do whatever you need to do to get the upset from that loss out of your system so that you can do today what is possible to make a better tomorrow.

Disclaimer: I do not currently work as a stock broker or professional money advisor. The views I have expressed are my own opinions. Investing in the stock market entails risk, including the possibility of losing all of your invested capital.

Market Update - Asian Gaming Stocks On The Rise

Analysts from Barrons to Forbes are asking the question, "Does the current uptrend have any legs?" Last week was marked by impressive gains in the Dow, S&P500, and Nasdaq indexes. Although Friday and yesterday were down days, partly due to uncertainty about the the Obama administration's intervention in the auto industry, the volume wasn't all that impressive. On the other hand, today's activity seems to indicate the market has digested the news and is continuing its recent ascent.

I am as concerned as the professionals about the specter of poor earnings announcements and higher unemployment projections for the second quarter. These dynamics could derail the current uptrend. However my stock investing mentor, William J. O'Neil, hails from a heritage whose only sacred mantra is, "Never argue against the market!". Therefore we say that the market is heading up because, well, it is in fact heading up. We can leave the wherefores and whys to the professional analysts while attempting to benefit from the facts of the matter.

One area of impressive growth of late has been in asian stocks that provide computer gaming/entertainment to that part of the world. This morning, I decided to load up on some shares in this sector, we'll see how that goes.

In case you're wondering how my market adventure into stem cells went, I have two words for you: "not well". But I learned a(nother) valuable lesson from Mr. Market about my own tendency to predict which industry groups will lead the market and when. Today's purchases were not about predicting, they were about following what is already leading. (which, when you boil it down, is the main difference between value investing and growth investing)

Birthing the Books Inside Me

They say, "Competence happens in a moment," and I have observed this to be true for myself and for many of my friends. Have you ever held most of the pieces of a mental puzzle in your mind - yet there was one crucial piece that you couldn't quite put your finger on? Later, through some serendipitous circumstance, (an offhand remark, a book, a song, etc) the missing piece came to you and the entire puzzle was solved. Once a solution like this occurs to you, it seems like an epiphany - a moment of enlightenment that illuminates not only the original puzzle, but also numerous other minor conundrums that had been put aside in the cupboards of the mind for future inquiry.

Over the years of my adult life, I have held many of life's major philosophical questions (Who am I? Why am I here? What is truth? etc) in this state of mental suspension while living out various different lifestyle situations. Because I journal, I have been able to notice the essential things which have resonated within me as common and authentic among my experiences. Within the last twelve months, it has felt as if several "final pieces" to these puzzles have come to me.

As a result, I've got about five books inside me that are mostly written. By that, I mean that it would only take a few weeks of writing to get any one of them in manuscript form, ready for editing. One of them is actually fully written in my mind, but I want to find an artist to collaborate on the project. It is a short, illustrated, guided mental journey in book form that would also include a CD with the text of the book spoken in several languages.

There will be many details to work out over the next months, such as: who will be my publisher, what channels of distribution will I use (Traditional? My own web site? Amazon Kindle? etc) how will I promote my work? etc. But none of these concerns feels daunting, they are all just parts of the adventure of giving birth to my spiritual "children" - perspectives on life that particularly turn me "on" and that I believe in my heart will delight and benefit others. I'll keep you informed on my progress here, watch for it!

Late to the Rocket Launch

I'm a guy who likes to give advice. I'd like to believe that, over the years, I've mellowed from coming across as a know-it-all to becoming a person who gives advice back to pay off the good advice I've recieved.

Be that as it may, Friday marked an event that illustrates how easy it is for one to neglect one's own advice. I've been sharing a "hot tip" with the stock investing community for over four years regarding stem cell research companies. One of George W. Bush's earliest actions as president was to ban most stem cell research. It was as clear as clear could be to me that one day that policy would be reversed and a whole raft of companies specializing in this research would rise with the swelling tide of progress. On Friday, a West Coast company won FDA approval for the first-ever study of a treatment based on human embryonic stem cells. I have watched this company closely and have traded in and out of it several times in the last year.

When the announcement came out, the stock shot up over 50% between Friday and Monday. Was I already in this stock on Friday? No. Was I in any of the other stem cell stocks I've been watching for the last three years? No. I had recently moved my holdings to cash in the aftermath of the financial crisis, (a good move) but had unwisely allowed the other cares of this world to distract me from keeping tabs on the market.

This is a good lesson to learn: It's not enough to see an event coming, you have to be sure to set yourself up to benefit from it should your prediction come true. As Lao Tzu wrote in the Tao Te Ching, "People usually fail when they are on the verge of success. So give as much care to the end as to the beginning; then there will be no failure". How hard would it have been to bought on some shares in the days before President Obama's inauguration? Answer: not hard at all. So why didn't I take care of this in time? As my mentor, Jim Rohn, would put it, "It was also easy not to."

Luckily, I'm in on the secret that there is no lack of wonderful, exciting opportunities in life. I guess I feel the "missing" of this opportunity more strongly because I've been mentally invested in its eventuality for what seems like a long period of time. Practically speaking, the long term upswing for stem cell stocks in general will almost certainly dwarf the gains my favorite stock made on Friday and Monday. As the market would have it, the stock's price has pulled back on lower volume from it's lofty Monday highs and I have picked up a number of shares. All of this is well and good.

Nevertheless, I intend to be aboard the rocket beforehand the next time I forsee an inevitable blast off.