Morning Value Investing Observations – Wednesday July 13, 2011

If you self-manage your investments, the first thing you have to learn is that the markets have an ebb and flow just like the ocean tides. The flows up and down must be expected and considered normal and so are the subsequent ups and downs in one’s portfolio. There are times to step on the gas, times to lift your foot off the brakes and gas, and times to put your foot on the brakes. We may be getting close to putting our foot back on the gas for a run back up to resistance. I’ve talked about “metal capitol” and how precious it is. One’s frame of mind and perspective can be built to withstand the ups and downs through constant education and by learning from one’s own mistakes, or better yet, through the mistakes of others.

The sharing of information and exchange of ideas in the BIO Forum is a key tool that I use as a trader since sharing information and having others to pose questions to is priceless IMO. I don’t know too many people that I can talk to about trading and investing. The BIO Forum provides a trader or investor with team mates who can help by confirming a potential play has legs OR by ID’ing a downside that was not considered.

The recent 10 year look-back as to what July might provide in terms of market performance helps frame limits of what the market might do on a historical basis. Even though I’m not a political animal and I never really focused on macro economic or geo-political issues, I’ve learned that I need to pay attention to those issues in order to harvest profits from the opportunities that events can provide.

The second quarter earnings season that we’re now entering should take center stage. I’m going to watch closely to how the earnings are received. In the past, revenue misses and forward guidance seemed to be keyed on and misses in those two areas resulted in haircuts. I’m wondering if close attention to how earnings are made in terms of if plays will get haircuts for making earnings through share buybacks, labor cuts, etc..

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