Another less-bad week is in the making for corporate earnings, housing sales, and unemployment trends--perhaps less bad enough to say that corporate capital is on the mend--less bad enough to keep the markets from driving the price of all things down. But if the weekly rate of less-badness holds steady at "only about" a half-million newly unemployed and half a dozen banks closed down we will be sliding that much closer to Real Hard Times.
This week may give us a chance to put some big questions onto the table about the way things work and the Real Meaning of the stresses we're about to undergo, together. Let's talk about the Real Market, shall we? And the Real Deal that we're all in the process of cutting.
For five months I've been cramming market analysis the way I used to cram geometry the week before college boards. And for strictly educational purposes I have taken some advice from John Dewey by making my study "hands on" by putting a few hundred bucks into an online trading account. Thirty nine trades later, my portfolio is outperforming the dollar, so I haven't lost any Real Money yet, but I've learned a few things.
Dewey was correct. What you learn is different depending on whether you are watching or participating. Put just a little money in an active market account and suddenly things go pop and start dancing all around you. Right away you lose your sense of what's really up or down.
An abstract lesson that the market teaches you is the distinction between judgment and theory. You take or sell a position at so-and-so a price. That's judgment. You base the decision on what? After your first few killer trades you begin to feel a gut-level desire for some theory that will help you to keep your head from spinning and your palms dry. Yes, a few hundred dollars means that much to me. So you have to go looking for market theory.
One of my early favorites in market theory was Investor's Business Daily, because it identified a fairly consistent set of criteria for buying and selling, and then was considerate enough to remind me to breathe. IBD offers advice you would expect to hear from Ben Franklin. One rule that stuck with me is to never take more loss than eight percent.