This blog post originally appeared on RealMoney Silver on July 25 at 7:27 a.m. EDT.
My mantra remains the same: Be opportunistic, keep investing/trading positions to below-average sizes, and take advantage of the volatility and sector rotation that Mr. Market gives you.
When you listen to, or read about, a momentum player jumping on a sector or stock, avoid the recommended action like the plague as the trend has not been your friend and may often change.
When you listen to, or read about, an unqualified and convicted view, also avoid that recommendation like the plague as there is limited consistency or patterns in place. The backdrop remains too uncertain for conviction.
It never is easy, especially in this year of tumult -- a year in which the men are separated from the boys.
Indecision and a general inability to evaluate individual stocks' values are resulting in outsized short-term moves, as we have witnessed over the past week in financial stocks.
The daily/weekly price changes are being exacerbated by an overpopulated and trigger-happy hedge fund community that is desperate to perform -- and generally failing to do so. Facing business pressures and pressures from investors (especially of a fund of fund kind), the most dominant class of hedge funds seems to be magnifying the moves that are ever more random and incomprehensible.
If emotion is ruling markets, then the rapid and outsized price changes indicate that the investment professionals are fuzzy about valuation. What makes one think that we mere mortals have a clue? That uncertainty has taken the market from the brink to nirvana and back many times this year -- and at breakneck speed. And it shows no evidence of a change in pattern!
With half of 2008 now over, the year appears posed to go down as a year in which past investment idols become bums -- and, to a more limited degree, last year's goats become this year's heroes.
If you are not facile, fleet-of-foot and you are unaccustomed to the volatility, don't produce (i.e., invest/trade) -- just watch the movie and eat some popcorn.
And, above all, err on the side of conservatism, as every day a new movie seems to appear.
Doug Kass writes daily for
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Doug Kass is founder and president of Seabreeze Partners Management, Inc., and the general partner and investment manager of Seabreeze Partners Short LP and Seabreeze Partners Short Offshore Fund, Ltd.