When you are a private investor, if you wish to make the bulk of your money investing, you are in a very very tough sport. See, it doesn’t matter how hard you work, how many hours you work, how many charts you scan or the amount of energy you put in it. If you make bad decisions, you are going to LOSE money. Now think about that for a moment. There are not very many businesses that I can think of where you can pour your heart and soul into it, work long hours, do everything in your power, and yet at the end of the day, you can be poorer ( sometimes MUCH POORER) than when you started.

That’s the world I operate in, and anyone that "invests" for a living operates in. To an extent however. Ahh yes the caveat. See if you run a mutual fund, or a hedge fund, you get paid EVEN IF YOU LOSE MONEY. That my friends is some significant difference, eh? You bet it is. Follow along with me here.

On Tuesday morning, it was evident that the market was going to open sour. They didn’t like Alcoa’s earnings report and all around the globe on Monday night there was weakness. So, it was pretty evident we were going to have a weak opening session. Now the question always becomes, should I sell the open? Should I hold on? Well one of our holdings, CY, opened above where we had bought it, but it was quickly rolling downhill. I had ample time to pull the trigger and actually make some money. But, as has been the case for months, any opening weakness has been offset by violent buying shortly afterwards, and a lot of the stocks you might have dumped, go on to make more gains. I decided to hold CY past (below) my entry point and see if it came back with the market.

After about 25 minutes the market did recover. From being down almost 60 it was down just 19. All the stocks we were carrying dipped at the open and then moved back higher. EXCEPT CY. It couldn’t muster the ‘oomph" to get back to even. So once again I had a decision to make. Do I sell it, take the little hit and move on, or do I hold it knowing that it wasn’t CY in particular that was in the dog house, the whole market was soft? Now here’s the point folks. IF I sell it, I take a monetary loss. If I hold for a bounce and it doesn’t come I take a bigger loss. Therefore my decision directly effects my actual "take home pay" for the day/week/month.

Now let’s put the shoe on the fund managers foot. He’s getting a base salary. He’s also getting incentives and performance bonuses. If he sells CY ( or any other stock in his universe) for a loss, do you think it effects him one iota??? Not a chance. He has no real skin in the game. If he takes a hit on something, it doesn’t come out of his pocket it comes out of yours. He might be on a golf course, whacking balls around for all we know. The bottom line is that win or lose for the day, it changes NOTHING about his income.

That is exactly why personal investing is one of the single hardest things you’ll ever master. When you make mistakes, it hits you in the pocket the very same day. But then it gets even worse, much worse. As you know I constantly whine about the fraud and manipulation that takes place in the markets each day. Well when the "criminals" yank a "rug pull" out of the clear blue and take the market down 100 points on no news, no event, they just wanted to, you and I might take a hit. Yet once again the guy running the mutual fund takes no hit. Sure his "performance figures" might suffer a bit, but as far as his actual pocket book? Nada. Nothing. Zip. He’s as whole as he was the day before.

Oft times you’ll hear me whine about the parade of talking head idiots they trot out on CNBC each day to tell you why it’s the single best time in history to buy stocks. That doesn’t matter if the DOW is at 14000 or 65000, to them EVERY day is the perfect day to buy. Why? Because again, these mutants get paid handsomely from playing with your money. Even in the standard hedge fund, the fees are usual "2 and 20". What’s that mean? They charge you 2% of your money each year for the privilege of you sending it to them. Then, they take 20% of any gains made on that money. Well  what if there’s no gains and in fact they lose 55% like Cramers vaunted Charitable trust did in 08? No biggie, the firm still gets the 2%. Now that doesn’t sound like much, but let’s suppose someone now has 100 million in assets. Just his 2% service fee gets him 2 million bucks. Granted he can’t party like he wants, but he doesn’t have to worry about affording a cheeseburger.

The single biggest reason to learn good money management skills comes from the fact that WE don’t have the privilege of having someone else pay us even if we screw up. This is why you often see me take profits too early, or place stops "too close". In our world, which is the REAL WORLD, if we screw up, we lose money. Real money, the kind that pays my bills. That’s a far cry from the blow hards that lie to you each day on the financial networks. Okay, so what brought this up? Tuesday morning they had Bill Miller on CNBC. Miller has run his Legg Mason fund for years, and everyone was "gaga" over him being able to "beat the S&P for 15 straight years". On the surface that sounds tremendous right? I mean if the S&P gained 10% for the year and you gained 15%, you are indeed "doing something".

But it’s all not what it seems. Using the S&P as a benchmark is just Wall Street BS. What happens when the S&P is down 30% for a year and you only lose 28%? Well your are regarded as a genius! You get to make headlines like "I beat the S&P for 15 years!"  Big deal. Guess what, in 2008, Bill Millers Fund lost 55%. Read that AGAIN. 55%. He’s got to make over 100% to make up for that disaster. Yet somehow he’s still a fully respected hero, a legend.

Well here’s my take. If Bill Miller had to personally take a 55% loss, he’d be a whole lot different of a fund manager eh? If when he blunders to the point that his investor clients are down 55% in a single year, HE had to take a 55% cut in Salary, chances are he’d work a lot harder eh? I think so. But guess what? Except for not getting big fat bloated bonuses, nothing happened to his salary.

I tend to think that the most successful investors are the ones that take the reigns and ride their own destiny. You want a true genius? Our Buddy Trader Rob’s account was up 200% last year. All of it HIS money. Any losses incurred came out of HIS pocket. In 2008 while Miller lost 55%, TR was up 50%. If you want good returns, without the pain that holding through downturns brings, you have to do this on your own folks. Most of these fund managers aren’t really that good, they look good when the market’s rising is all. Well hell, any monkey with a dartboard can make money in a rising market, it’s what happens in a falling market that separates the genius from the crowd.  Remember that okay? We’ve never had a losing year here at IY. Find me one prominent TV personality that can say that and I’ll be mighty impressed. Until then, take these vaunted hero’s and fund manager of the year’s and disregard 95% of what they say. You’ll be much better off.

Okay, moving along to the market

The futures were "better" today than yesterday as we came into the open. But something interesting was going to go on as they were having their "Financial Crisis Inquiry Commission" where congress was asking the Banksters just what happened to melt us down. Unfortunately I couldn’t be here to hear all of it, but from what I did hear, it was astoundingly bogus. All it was, was a way for them to weasel out, and try and justify what they all did. Yet the market remained firmly green. Was that because the FED was in the background buying things, to make sure the market didn’t roll over during their hearings? That wouldn’t look good to the public if the market rolled over while the top clowns were getting asked questions they had no good answers for.

Or, was the buying real? We did a quick study of the option open interest situation, and from what we could glean, the way the market could punish the most amount of people, would be to roll into options expiration on Friday pretty flat. So it was possible that the green we saw, was simply the market making back what it lost on Tuesday.

If they pull off a win tomorrow, it’s going to probably suggest that they’ve squared off enough of their positions today, to start going "back to work" and we could see the market continue higher into next week. There’s no question that the still have the desire to move us up, but the one thing that’s been terribly lacking is volume. Today’s volume, and yesterday’s volume was simply punk at best. If we don’t get some upswings in the volume numbers, the FED’s game of goosing the market could run out of gas.

I’m leaning towards the idea that we do end green tomorrow and next week, we see the market make another small gain. Have a great night, we’ll see you on Sunday!.