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Thursday,
April 16, 2009
(Cont'd from
above)...
Jim (cont'd):
If you can spot a
big move in a stock
or the whole market
before it happens,
you are made in the
shade… tonight I am
going to teach you
everything that I
have learned about
calling these moves…
really from my hedge
fun… and I am going
to put it to work
for you in this
show… we will start
with bottoms… those
times when stocks
have hit their low
points and are ready
to move higher… then
I will tell you
about tops… there
are all kinds of
tops… and you better
be ready for them
because they are
dangerous… after
that I will explain
how I try to call
earnings revisions
and sector rotations
before they happen…
why should we wait
to say there was a
vicious sector
rotation yesterday…
how about predicting
one ahead… you learn
to do what I do… and
you will have a big
edge on the street.
So, how do we see a
bottom coming… if
there is one thing
that I think I have
done best in my
career on Wall
Street it is
spotting bottoms in
the market… no
techniques, no
formulas, no hard
and fast rules…
understand, real
bottoms don’t happen
all that often… but
when they do, if you
call them correctly,
you can stand to
make a small…
actually a not so
small fortune…
bottoms are great
because they
represent fantastic
buying
opportunities…
without very much
risk… as long as
your bottom call is
right… so how do you
call a bottom…
First let me tell
you the wrong way to
do it… and then I
will help you get it
right… a lot of
people want to rely
on pure technical
analysis… they look
at a chart and see
that a stock has
been knocked down
far, and then
stopped moving….
these chartists,
even the best ones
are wrong… they are
wrong often…
sometimes a stock
that goes into
freefall is only
taking a breather
before sprinting…
sprinting towards
zero… the chart is
not enough… you need
to look at the
fundies too…
technical analysis
as they say, is
always right, until
it is wrong… I have
never, ever seen any
software package
that works for this…
despite what the
brokers tell you…
they always offer
the software that is
supposed to show you
everything… yeah…
and a lot of the
analysts at the
major firms get
pressured into
calling bottoms by
their major
customers… I have
never seen a stock
bottom out based on
earnings reports
either… the thing
about a bottom, is
that too many people
see it coming… and
then it won’t
happen.
The other crucial
fact about bottoms
is that they rarely
happen all at once…
I have found that
over and over again
the market bottoms
in thirds… sector by
sector over a period
of days… not weeks…
it is not always the
case… but it is how
you should approach
a bottom… do not
give into that
thinking that you
hear the media
saying is it a
bottom, is it a b
bottom, is it a u
bottom… forget that…
bottoms occur in
stages… now here is
how I work… I just
want to talk to you
about invest
bottoms… really
investment mega
bottoms in the
market… you want to
see three things
when looking for a
bottom… market
sentiment must be
bad… and I mean
front page of The
New York Times… not
the business
section… the front
page… preferably the
right hand column at
the top… when the
malaise reaches all
the way up there…
that is a terrific
indicator that we
are nearing a
bottom.
You could also look
at the Investors
Intelligence Survey
of money managers,
it comes out
Wednesdays… when you
have a majority of
bears… when there
are so many bears
that they exceed the
number of bulls…
good sign that you
are close to a
bottom… when you see
mutual funds pulling
of the market the
significant way…
that is another
signal that a bottom
might be nigh…
understand that to
correctly spot a
bottom you need to
be right when almost
everyone else in the
market is wrong… you
also want to be
looking for
capitulation from
the bulls who were
holding out hold…
when they give up…
when they jump… you
get a massive
crescendo sell off…
you will see lots of
volume and sinking
prices as the last
hold out give up and
recognize where they
really live… and
they are sell, sell,
sell… that is your
chance.
You will not have a
bottom until these
investors have
thrown in the towel…
a crescendo bottom
is one of those rare
times when the
market bottoms all
at once… not in
thirds… it happens
very rarely… and
then you back up the
truck and you start
buying… finally, big
bottoms usually have
a catalyst when
market sentiment is
in the gutter… when
even the most
bullish of the
bulls… are like
Achilles, off
sulking in his tent…
and then you get
some bad news for
the market… oh,
sub-prime lending
prices, Asian
contagion, the Yen
dollar, what the
heck is that… it is
not a catastrophe…
but has a wide
spread effect on the
market… then, then.
The last couple
times that we went
to war with Iraq…
exquisite bottoms…
buy, buy, buy for
everything…
understand that the
market hates nothing
more than
uncertainty… in the
24 hours leading up
to both wars I
managed to catch
great bottoms…
because investors
could not handle the
total lack of
certainty… even
though I knew that
these wars were
going to eliminate
all of the
uncertainty once
they happened…
everybody else could
not have been more
nervous… so I got to
buy up a lot of
stocks on the cheap.
The bottom line…
▼ ▼
▼ ▼
▼
 The Bottom Line!:
How do you spot a
bottom… don’t be
discouraged when you
see these three
things… don’t give
up when everyone
else is giving up…
it is a bottom… and
you want to be the
only guy that knows
it, so you can buy
up stocks for next
to nothing… and then
relax as they start
to rise
afterwards... When
spotting bottoms,
it’s good to be a
loner; good timing
could make you
money. Let’s
remember we have got
to spot bottoms… and
we have to get in on
them.
[verbatim recap]
▼ ▼
▼ ▼
▼
Jim went on after
this segment to take
questions from
callers, and
responded with his
comments...
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Q:
I have a bottom
question for you.
Are the techniques
in spotting bottoms
in individual stocks
basically the same
as spotting bottoms
in the market as a
whole?
Jim:
No, no… because
bottoms as a whole
often revolve around
much more ephemeral
and psychological
reasons… really
trying to figure out
how many people are
negative vs. how
many people are
positive… a bottom
in an individual
stock tends to be
able to where you
get it to where its
net worth, is so
much better than the
stock itself… that
people, either
private equity
people, or the
company itself… take
matters into their
own hands and
recognize that the
company is way too
cheap vs. the stock…
that does not happen
vs. the overall
market.
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Q:
I recently got
really into value
investing, like deep
value investing. You
know Benjamin
Graham, you know who
they call the father
of value investing.
This strategy that
he had, what he
wrote in his book,
to buy companies
trading below their
liquidation value or
companies trading
below their net
current asset value.
And my question is
really, what exactly
is the net current
asset value? and how
can I implement that
into my investment
strategy?
Jim:
Okay, if you just
close the company,
what it would be
worth, is that
value… now I have to
tell you, earlier I
described that you
like it when you buy
stocks all the way
down… so cheap vs.
their worth… notice
though, I did not
say thru their
worth… I love
Benjamin Graham, I
have read everything
that he wrote when
he was around, but
let me tell you
something… he is
unrealistic… stocks
used to go to those
levels… they don’t
go there anymore…
before they get
there, companies
step in, CEO’s step
in, buyers step in,
acquirers step in,
private equity steps
in… do not wait for
his level… you will
never, ever pull the
trigger… and you
will miss way too
many opportunities.
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Q:
You have
consistently
recommended
Investors Business
Daily as a terrific
resource, and I
agree with you.
Along with your
site, TheStreet.com,
which you cannot say
is great, but I can.
Now admittedly you
don’t like charting,
but IBD seems to be
a chart and formula
centric system. And
I have noticed that
you disagree with
them on a fair
number of stocks. …
Jim:
You are absolutely
right, first of all…
I am not going to
disagree with those
qualifications… I
will say this, when
you are trading, I
like the discipline
of what Bill O’Neil
and Investors
Business Daily… when
you are investing, I
like to do it
differently… as a
stock goes down I
like to accumulate…
he likes to kick it
out… that is the big
difference… I
applaud there work…
I love the pictures
of stocks, and most
importantly I love
the content… the
articles.
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[verbatim recap]
[end of segment]
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