| Reputation can be everything. Think about it, does anyone want to invest their money with a guy (or girl) that drives a 1989 Ford Tempo? No, but why not? Because we associate making money, with affording the nicer things. We want our investment manager to drive a nice car, and our mate to drive the old car….or at least not a brand new $200,000.00 Rolls Royce. But is that really how we should think? If our investment manager is smart wouldn’t he or she be driving an old used car? Wouldn’t they wear an old suit and a Timex watch? Sometimes we accept things that don’t make sense, because we think ‘that is the way it is supposed to be.’ But sometimes, that is NOT the way things are supposed to be. Sometimes the way things are is all wrong. Take the stock market. If you watch the financial news, you would think that stocks have ‘roared back’. But is that the case? Take a look at this week. While it was down marginally, underneath the hood there is something ugly. Everytime we rally, the ‘Big 50’ – MSFT, AAPL, AMZN, FB, and the GOOG conjoined twins – out pace the rest of the market by a little. When we drop, they seem to lose a little bit less. Thus while the S&P 500 has been ‘range bound’ the last 2 months, the Big 5 are way up, and making up a bigger and bigger piece of the S&P 500. At the rate things are going those 5 stocks will make up 25% of the index in no time. It is entirely possible we could have the S&P 500 near all time highs and see XLI, XLF, and XLE, traditionally huge parts of the SPX down substantially on the year. This would mean the S&P 500 options that you trade are current NOT what you were trading a year ago and NOTHING like you traded 5 years ago. Potentially, a year or two from now, the S&P 500 will be totally different. Your Only Option, Mark Sebastian P.S. – As the market itself changes, it becomes important to know exactly how to trade individual stocks for extra gains, without having to worry about fancy technicals, complicated fundamentals, and complicated options spreads. Click here to learn why you only need volatility for consistent trading success. |