Investors are blind to risk lately

These days, they are buying high and selling higher, and think their stock picks are protected by good fundamentals.

By Stock Traders Daily Dec 12, 2013 9:53AM

Dice on stock listings © Kate Kunz/CorbisBy Thomas H. Kee Jr., Stock Traders Daily 


It's a winner! Anyone holding shares of Wynn Resorts (WYNN) over the past month (or more) has to be happy, as happy as a roller after a 20-minute run at the craps table. 


The stock is surging, and the company seems to be making the right moves. Investors are embracing fundamental data too, and they like what they see all around, but in the midst of this run investors have forgotten about something that is extremely important. They have stopped caring about price.


What happened to buy low, sell high? 


Instead of waiting to buy low, investors in today's market are buying high and hoping to sell higher. Many investors see no chance for a market pullback, and even if one comes those investors who are buying stocks like WYNN, stocks that have increased aggressively, believe that their stocks are sheltered because of the good fundamentals, but that is not true.


When markets fall, even good companies fall with it, but investors in today's market seem to be forgetting that. They also seem to be relatively blind to risk, but that is probably because the stimulus has clouded the economic conditions that actually exist.


I recently wrote an op-ed for CNBC that asked when the real economy would finally stand up, because in today's environment what we see is not natural or sustainable. It is, however, this that seems to be causing so many investors to be blind to risk, and that will soon be a big deal.


To avoid assuming too much risk all you need to do is to start caring about price again, and that means sell when stocks are at resistance levels. That is exactly what is happening to WYNN according to our real time trading report for WYNN. The stock has recently surged to test our stated longer term resistance levels, and if that resistance level holds the stock is a sell.


Investors should secure gains by either selling outright, or by hedging their gains with option strategies. Traders should also sell at these peaks, and if resistance levels hold traders should also consider shorting WYNN with a downside target of longer term support, which is currently about 15% below the current stock price. New buyers should avoid WYNN at these levels.


Tags: WYNN
24Comments
Dec 12, 2013 10:26AM
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As long as the Fed is dumping 85B into the market every month why worry?

Democrats keep telling us ho 'happy days are here again', inspite of all evidence to the contrary.   Lemmings believe them.  

They are in full blown manipulate the numbers mode with unemployment, GDP and Obamacare.

The latest budget deal is bad for the country.  It increases spending and raises "Fees" read taxes.  
More Revenue and spending is not the answer.  Clearly even the Speaker of the House needs to go too.  Hopefully some Senators will do what it takes to restore the 58B in spending cuts.

We need to slash our budget 800B.   We can start by letting the farm bill die.   Slashing all of Obama's food stamp increases (should not be necessary anyway, with the economy going as well as the democrats say!)
Dec 12, 2013 10:45AM
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This isn't rocket science.  Stock prices don't rise and fall in straight lines.  There's an ebb and flow.  All-time high prices are inevitably followed by an eventual, albeit temporary, pullback.  We're near all-time highs now.  There's just not that much short-term upside from here.  Long term is a different story.  

Dec 12, 2013 11:22AM
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We are still and will be for some time in a compressing economy here in the US.  We have developing countries all over the world fiesting off the American consumer.  Wages and lifestyles in America are and will be on the decline until the arbitrage is complete.  Globalization is not going away which means most American lifestyles will only continue to decline.  Nothing ever goes straight up or down but in time the direction is very clear to me.  It is like gravity, a given and no way out.  Developing countries have fewer worker controls and the Asian Countries seem to have the political will to abuse their younger workers and to me this is obviuosly happening now here as well. Goosing these markets with debt and QE is just avoiding the inevitable in my opinion.  Income and wealth consolidation is well under way.  I think the priming the ecomomic pump idea is a fatalistic policy. The policies in place are the problem. We should look at some South American economies to have a clearer idea where we are headed.  I suggest reading up on the Columbian economy which I feel is a good representation of where we are headed. 
Dec 12, 2013 10:51AM
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Very sound article Thomas.  I agree with your perspective and observations.
Dec 12, 2013 12:50PM
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Not really sure I follow all that is intended by the Article and Author...

Although will agree that many smaller investors or retail buyers have "waited in the wings" too long to throw cash back into the Markets...

Waiting when there seems to be very little risk attached to investing, usually puts one at the higher prices to purchase and a complacency timing in the Markets.

As what has been touted for decades, "markets are very hard to time, at best."

And the last 5 years appeal to Warren Buffet's spiel of " Buy the fear, Sell the Greed."


My feeling about the Markets the last 7-8 years are my own, whether others have similar feelings that's totally up to them...

"Buy and Hold are not necessarily dead", but all investing has to be adjusted occasionally and re-allocated to the benefit of a person's "intended goals."

A "Value Blend" of positions, may be the best long term plan for a person to build on for retirement or just to acquire wealth....Another one of Buffet's "mainstays."

I agree with much of that, along with Diversification, Research, and Re-allocation or trading to some extent..

I know of no investor that doesn't make mistakes, and bad picks can have consequences...

But with a long term plan or idea, much of that can be overcame...Nothing is bullet-proof.


With all the outside forces, of QE, World recessionary turmoil, Recoveries, Trading platforms and manipulations; There has been a lot of money made since 2008-2009...

Investors that were out, lost....Ones that took chances or stayed the course, gained..


Corrections have been strange the last 3-4 years with minor pullbacks over a few days then back to an eventual uptrend....Can it continue, that's anyone's guess??

How long, is the $64K question. ??

Dec 12, 2013 10:43AM
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Some folks may be becoming complacent and this can be  very very expensive.  No sauvy investor can really believe these markets won't consolidate at some point.  But we do have some perma bulls here who claim they obsorb all the downs with the ups and will just look the other way.  But watching shrinkage like we are bound to see at some point does require having a cast iron stomach.
Dec 12, 2013 4:18PM
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  We as small investors have a nimble advantage over the bigs and also can insure our positions like never before. Yes it will cost you profits but insurance on your health is a waste of money until you need it. If your big in the market you might consider this. Me I'm the smallest I've been in a while. That doesn't mean expand my position at any time. I tend to be a swing trader anyway. For long term holders the old adage you can have the bottom 10% and the top 10% is I will take my 80% out of the middle is good thinking.
Dec 12, 2013 12:59PM
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Another item would be...

If investors didn't learn anything from the "Debacle of 2008-'09" they probably shouldn't be investing on their own...

On top of that, it took the majority of the big guys off guard also..


There were a few warning signs and a few economist' that had dire warnings, but the "great majority" never saw coming, what happened...

If they Monday Morning Quarterbacked it...THEY ARE LIARS.

Dec 12, 2013 4:04PM
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  There was a number of people warning during the tech bubble and 2008-09 as well, our old Fleck being one plus Robert Precter, Doug Casey and others. Problem is in both cases as now they were early so they get ridiculed. The market continues up and people get complacent.                                                                                                                                                                                                        When the market interred a major pull and bit them in the back side they wouldn't admit they warned for looking a bit foolish. Human nature I guess.       Some of the big guys knew to. You can tell when they know something is amiss when you see  there cash positions expand and overall market volume backs off. There's little they can do because of their size. They know if they start sell large blocks when nobody is offering bids they will have to do so at a discount. Some one breaks rank and starts selling at a discount and the cascade begins. At some point the market makers don't want to take a beating in the stocks and leave there post, their computers now, and a faster cascade begins. Lots of complaints on this issue last time around.   Keep profitable!                                                                                                                                                                                         
Dec 12, 2013 2:00PM
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Dave, my only point of the Big Boys "not knowing" of the 2008 Debacle upon them...Was because of such a piss-poor protection of Client's monies or the "performance" of all the Funds that were in the Marketplace...Individual Equities took their own beatings and some ( a few) performed much better than others..

The "big boys" and the "fund managers" could have made a ton of money, because "churn and trade" is their mainstay of income to their business...THEY NEVER SAW IT COMING and THEY NEVER EXPECTED IT TO BE AS BAD as it WAS....PERIOD...They lost their azzes.


I TRACKED all of this....I/we BEAT 98% of FUND Mgrs., Warren Buffet and the S&P...

That may not be saying much, but I felt better and thought I had made some good choices..

We were FULLY RECOVERED by July 23-25th. of 2009...I'm proud of that fact.

And we also GOT LUCKY....!!!

Dec 12, 2013 3:10PM
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Yes....There is some truth to all that, unfortunately for many they should be made to eat it, instead of fkng the Clients like so many were....Too big to fail, useless or too big to jail...Emptor Caveat.
Dec 12, 2013 2:48PM
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In today's Manipulated Markets where MOST Shorts are Targeted, it's hard for even Professionals to Hedge properly especially considering the Size and Scope of some of their holdings. The FEDS declared War on most Shorts Decades ago.

The House gets paid whether Clients make money or Lose money. I recall the line in Trading Places.... Classic Movie.....Still very Funny no matter how many times I watch it.
"Randolph: Clear so far?
Billy Ray: [nodding, smiling] Yeah.
Randolph: Good, William! Now, some of our clients are speculating that the price of gold will rise in the future. And we have other clients who are speculating that the price of gold will fall. They place their orders with us, and we buy or sell their gold for them.
Mortimer Duke:Tell him the good part.
Randolph: The good part, William, is that, no matter whether our clients make money or lose money, Duke & Duke get the commissions.
Mortimer Duke: Well? What do you think, Valentine?
Billy Ray: Sounds to me like you guys a couple of bookies."

So sure They freaking Knew. Whether or not they understood just how bad it would get, who freaking knows. Seeing as the House always wins, they likely didn't even CARE.

For Instance, Entities like Goldman-CRAP were heavily shorting the VERY Crap they were Promoting as Triple AAA to their Clients. The very thing that caused the Great Recession and without the Fed's actions would have literally brought the House Down. Surely without that intervention and their printing to Infinity that happens.  And it still may yet bring the House Down.

Dec 12, 2013 1:33PM
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The Great Majority of Folks don't even know what the Weather will be like today much less the actually working of the in and outs of our Economy and Stock Markets. Most don't, nor even care to. Most have been led to believe in the never ending Line, Nobody can time the Markets so there no point in trying.

So most folks just put money away in their 401Ks, etc and wait for retirement and a expected Huge Payday. Since that has worked very well in spite of the various downturns, most folks hardly expects that to ever change. There is a good chance however moving forward that they are dead wrong. Buy and Hold to Infinity is DEAD. Anyone that's truly aware of the looming issues knows that. We are not only moving towards the end of the Bigger Boom after Busts cycle here, we are nearing the end of a Bigger Boom and Bust Global Cycle. And yes, that's just my opinion.

So back to the issue of whether folks say it coming, the Majority of Common folks didn't because the Mainstream Media isn't going to Report something that will clearly derail Stock Markets and the Economy. Most folks aren't really paying that much attention. At least not enough to make a informed analysis. But whether or not the Professionals knew, Heck yes they knew. That much is crystal clear to anyone really paying attention. The Warning Signs were there then just as they are NOW, some folks prefer you not know, that wouldn't sit well with all the DOW 20,000 predictions and their early retirement plans.

Dec 12, 2013 10:20AM
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Investors will always take profits when they can get them. Most Speculators will always wait and let GREED get the best of them. Folks are totally aware of the Scam which are so-called Fundamentals since what they are based on is Funny Money. It's been a great RIDE but those calling for vastly improving economic conditions in the Long Haul have not been paying attention.

Some folks think you can to infinity, Rob Peter to Pay Paul and never pay a Price. Folks like Greenspan and Uncle Ben, and soon to be Yellen. The Deficits numbers for the New Budget Year and it's still out of Control. The Fed's Balance sheet is out of Control. Record Buying on Margin is out of Control. Japan is about to JACK up it's sales TAX to 8% from 5%. Idiots think Bit-coins is Real Money. It's not, it's just another SCAM. Literally anyone could create that crap and call it money. If rates rise above 3% on the Ten and continue upward while we also see a big Rise in gasoline prices, rest assured the Epic Fail will come far Sooner than Later.

When you walk on a New Car Lot or any type of place where folks are trying to sell you something, they don't ever say leave, please don't buy anything. Money Managers are no different. They under-perform the markets yet want you to think otherwise. This game is Rigged and everyone knows it. Holding to Infinity is DEAD. Bears make money, Bulls make Money, and Pigs always get Slaughtered. Old Jimmy wants everyone to forget that.

Dec 12, 2013 1:21PM
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Funny thing is that I get a ton of static from MG's so-Called Democrats types that he loves to hate on. Another funny thing is the Majority of Democrat Voters that actually go out and VOTE hate free Loaders just as much as MG and or Me. Most folks regardless of Party aren't pushing for never ending Handouts, Folks are pushing for better wages after a Decade of seeing the Leech Class 1% trying keep it all to themselves. The 1% Leech Class bought off and paid for folks like MG a long, long time ago.
Dec 12, 2013 11:07AM
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Today's modern Day Fiat Based Money System is mostly based on one's Military Ability to back it up. Take that away and the House of Card will literally come tumbling down. So sure there's faith, in our Massive and Modern Day Military which by the way was Built off those Fiat Dollars. Which by the way, has allowed us to spend more on our Military than the next 10 countries below us combined. That's the Biggest REASON why folks accept our Currency.

Both parties like to Hand out other people money for votes, that's hardly anything new. Corporate Welfare is just as Rampant as Welfare of any other type. Too Big to Fail, Too Big to Jail, how's that working out. Fed's have to print to infinity just to keep that SCAM going. The other-side has  been handing out other people money as the Working Poor and Fading Middle-Class are working harder being far more productive yet seeing their effort be redirected to the top 1% Leach Class, those that MG calls his God. Seem some posters are fine and dandy with that. It will come at a Ultimate Price. And it won't be pretty. Greed has destroyed many Great Nations and America isn't immune.

Dec 12, 2013 11:20AM
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I hate the Title of this Article. Do folks really think that after all the Bust and Booms we have had over the Decades, folks are ignorant of today's issues. They have been well Documented so I find it very difficult to believe folks don't understand the ongoing Risks which are stocks and the economy. Certainly there are Folks that want folks to forget RISK so they can achieve their Agendas, basically money and or politically.

The Biggest Driver of these Markets has not even been Retail Investors, It has clearly been Massive Corporate Buybacks, and these Folks know exactly what is going on. They make out like Bandits regardless of the eventually outcome. They get Massive Stock Options for literally free while the little gut is suckered IN towards the end. The Biggest Cable Financial Network stated that since 2011, 60% of earnings are due to Stock Buybacks. That has been possible due to the Fed's Financial Engineering and the Tax Benefit assigned to Corporate Stock Buybacks.

MG likes to make Grand Statements but does very Little else to back it up with proper Data Points. He has one Agenda, protect those that don't need protecting and whom have been the biggest Leach Class for well over a Decade, the Top 1%.

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