Tuesday, January 1, 2008

Wall Street is SLOW

Wall StI KNEW we had a housing bubble. On another blog, I called the top of the market in October of 2005. I was dead on in California. I was tempted to short the stocks of a few homebuilders and mortgage insurers but never did. I figured that Wall Street had to know that these businesses were in trouble and had already priced it into the stocks.

I KNEW that the Wii would take off. In fact, I told my friend Scott to buy Nintendo stock. I didn't myself because I was too lazy to call my broker and place an order since Nintendo only trades on the Japanese exchanges. I knew how hard it was to get a Wii. People were snatching them up faster than they could be shelved, and I knew Nintendo had something special. I figured Wall Street knew too so, and I was lazy, so I did nothing. Stock doubled in a year.

I KNEW that Guitar Hero 3 was the must have item of the year. I was actually going to buy it a few weeks ago, and then Vivendi announced that it would purchase them. The stock jumped over 20% that day and hasn't looked back.

There is the theory that the market always perfectly prices in all news to a stock. That's a bunch of bull. Wall Street will often over react or under react to news. It's up to you to figure out the real story and play things correctly. If you know deep down inside that the so-called-experts have it wrong, chances are, you are correct. There is a fantastic book by Peter Lynch called One Up On Wall Street where he talks about advantages that individual investors have on the street. One of the many advantages you have is that you see things at the ground level. Much easier for you to spot the trend starting than the analyst on Wall Street.

Happy New Year everybody!  I hope we have a great year going forward!

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