Friday, January 01, 2016

Year in Review, 579-92-5 grade A- for 2015

For 2015 I am up about 14% in my trading account. I count 579 winners, 92 losers, 5 break even, for about an 85% win percentage. Again, for new readers that isn't remarkable because that's about the probability of the trades I initiate. The other side to a high win percentage is that losses can be big, and gains almost always very small. The bigger picture for 2015, is +14% is very good as compared to buy-and-hold in most asset classes. Here are a few etfs, best to worst:

SPY -0.8% S&P 500
TLT -4.3% U.S. 20-year bonds
IWM -5.9% Russell 2000

GLD -10.7% Gold
SLV -12.4% Silver
EEM -18.1% Emerging markets

For average investors, 2015 was a year to preserve capital. Sure, on the Internet you'll read reports from braggarts (some real, some paper traders) with enormous profits. Just keep in mind that it is like fish stories often selective memory and inflated imaginations. On the Internet, losers tell few tales.

As low as bank CD rates are, they did better than most asset classes. SPY edged out a 1.0% bank CD rate after factoring the 2% yield. Everything else on the etf list lost money. As always, predictions are more about entertainment (and sometimes selling subscriptions) than making money. The U.S. stock market does feel top heavy. A very few stocks seem to be leading while there are land mines all over the place for would-be bulls.

Perhaps a bigger question than the direction of the stock market is the bond market. 2015 saw some cracks in the armor. Will there be a slaughter? Or a slow down trend? Or something else? Bond market bears may have made modest amounts of money, but there were big drawdowns if they stayed bearish all year. I would not be in any hurry to buy precious metals. The bear markets tend to be long and drawn out and the bull often offers many chances to buy. A person probably won't buy near the lows, but buying near the lows tends to be a high risk, low percentage play. I prefer better percentage odds, even if it means missing some of the move.

One big thing that I worked on in 2015 is focusing on process not results. This idea comes from pro golfer Bubba Watson. Mr. Watson used to get upset after missing a putt, or shanking a shot. So upset, that he would often make several emotion unforced errors. This was similar to me, that I would experience an inevitable loss and overcompensate, or trade emotionally. Instead, I will focus on staying calm. Losses are inevitable. Letting those losses cause unforced errors is something I can work on.

Predictions are mostly for entertainment. With that disclaimer here are a few of mine. U.S. stocks flattish, not unlike 2015. U.S. bonds, more of a slow errosion. Same for gold, the gentle drift down continues. As always, I find it more useful to listen to the market, look at the charts, then to try and predict. Directional trading is not my strength. Slow and steady turtle or chicken kind of trading is what I tend to favor. Once in a great while I may take a shot, but most of those turn out to be whiffs.

Happy new year to all. May 2016 be the best year ever.

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