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CSM |“Money In Motion”… The Melt Up in Financials

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The single hardest decision in all investing is what to do with winners.

Yes, yes, everyone knows it’s good technique to cut one’s losers and to let the winners run.  And to let them run and run until just before they peak, and then to sell them just before anybody else gets the idea to do the same thing.  That’s the smart move, after all.  It’s simple, really.  Find a winner, ride it to the tippy top, and sell before everyone else.  Collect one’s riches.  Rinse, repeat.  Nirvana.  That’s everyone’s plan; it’s also a dream.

For every time a market participant is so fortunate as to get involved before an opportunity is recognized by others, and then, is so fortunate as to get out while the getting’s good (to get out before adverse conditions appear), there are the other four or five times when the plan (darn it) doesn’t go so swimmingly.

In the context of the aforedescribed, today’s piece focuses on the subject of the near vertical move in oh-so-many financial stocks and attempts to answer the following three questions:

What to do if:

1)  If one is in the enviable position of being long/overweight Financials (stay, trim, or sell all?)

2)  If one is in the unenviable position of being underweight or not involved in Financials and is suffering on account (chase or not?)

3)  If one is in the unenviable position of being short Financials (cover or stay and suffer a bit longer?)

By our work, the answers to the above are:

1)  Trim a lot

2) Don’t chase- there will be ample time to buy at more favorable prices

3)  Stay and suffer a bit longer.  Relief, presumptively, is on the way, with a pullback being almost inevitable

 

Trade well,
-Carter


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