The Las Vegas Sun had a well reasoned and logical argument on Friday for why betting on the Pats to win the Super Bowl at 4.3 to 1 was a great deal, easy money, for a 12 point favorite. Usually it's a 6 or 7 to 1 bet. Anyone who watched football this year had to like Brady so much more than Eli. And yet the Giants came out on top. I am so very glad I followed my new years resolution not to bet sports any more. That upset would have been highly frustrating. As it was, since I didn't have any money on it, it was great fun to see the underdogs stick it to the arrogant Pats.
The market continues to act bearishly. I took a shot at playing the market timing game and my results have not been good. I'm just not good at playing this game. I think I have to accept that and move on.
Here is a link to an article in Conde Nast Portfolio on Dimensional Financial Advisors, a firm that specializes in market index funds for long term investing, very little market timing. The appeal of this is a more consistent approach to the market and less anguish and frustration. One percent fee. A small price for peace of mind?
Finally I'd like to note that two famous market timers both ended up going broke at the end of their long and storied careers.
The first is Victor Niederhoffer, whose aproach of selling puts into short term market bottoms worked fabulously until a short term bottom turned out to be a momentary stopping point before going much lower, at which point he was destroyed. Here is a report on that event.
The other is Jesse Livermore, the famous trader of the early 1900s who won and lost large fortunes many times over, and whose story is covered in the popular book "Reminiscences of a Stock Operator". The book ends on a high note and neglects to inform the reader that Livermore went bankrupt a few years later and shot himself in the head in a cheap hotel while composing a depressing apology note to his fourth wife. Here is a blog post at ugly chart on that sad ending.
So to sum up, I'm leaving the tricky options game to the expert traders in Chicago and New York. I'm just going to go the index fund ETF route, perhaps with the help of Dimensional, perhaps not. I'm also giving up on the momentum trading philosophy of Investors Business Daily. It may work in a bull market, but it's hard to know when for sure you're in one, and they're not so great at letting you know when that is, until after the fact. At which point they spill a lot of ink telling you they told you so, when they didn't really, a la Jim Cramer and his cronies.
So lower returns, also lower stress. I'm going to focus more time on my business, on what I really know. I think I'll be happier this way, and sleep much better. Cheers.
