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Let’s Not Fall Into The Gap: Balance and Harmony Pay Well Indeed
We were on a date in the 70s at the Rathskeller of Ghiradelli Square by the San Francisco waterfront. An elated gentleman at the bar where we were waiting to be seated offered to buy us a drink. It seems his company had just gone public and he had made very good money. We watched Gap do very well in the town of Levi. We noted his passing in September with a fond memory of sharing his success.
Yet another life lesson for capital seeking the best return and most character.
So what has this to do with Mr Market we ask?
Well, this morning we woke up early as we often do and found ourselves in an internal dialogue about the Trailing Stops that have been so good for us entering and exiting positions so profitably.
We have long known the one catch to Stops is that effective use requires continuous liquid markets, one reason we no longer trade options after losing our underwear on them. A Trailing Stop on an option that can double in a day may be less than effective for capital and profit preservation.
For a more thorough discussion of using Trailing Stops, see our post of 15 October 2009.
Meanwhile, we ask this question: Can anyone think of a good way to eliminate the risk of an illiquid market meltdown or meltup kiboshing the effectiveness of Stops?
We remember having a similar discussion re Phil Fisher in the Eighties. He maintained one sign of a good money manager was a lot of little losses with a few major gains. He held Motorola for a very long time indeed, a generation. His patience for monumental profits was echoed by Warren Buffett, who said his preferred holding time is forever.
We took this to heart using 30 year Treasury Bond yields as a metric for earning yields, rather than 10 year Treasury Bond Yields, which actually may give a three month lead on the Standard & Poors 500, according to Arthur Hill:
http://blogs.stockcharts.com/.a/6a0105370026df970c0120a6b17ce1970c-pi
