As the markets wait for the clouds to lift in Washington, we continue to see a mixed reaction so far as investors remain cautious (exhibited by low trading volume).
Earnings will start to whittle down as the month goes along, but we did have the markets reacting negatively to news from Vail Mountain Resorts (MTN) following the company’s earnings release today. Also, Darden Restaurants (DRI) was nearly 10% lower after the company announced it would miss next quarter’s profit estimates badly (a small portion of the miss is being blamed on Hurricane Sandy, but not as much as the media will mistakenly point to as the reason).
IACI Interactive (IACI) also saw heavy selling following a Wall Street analyst call downgrading shares to a “sell”. Finally, retail shares witnessed a bit of a divergence as luxury names like Ralph Lauren (RL) and VF Corp (VFC) lagged today’s action, while Wal-Mart Stores (WMT) gained ground. The Gap Inc. (GPS) also was hit on extremely heavy volume.
Beating the System
Every morning we wake up and come into the office to find the latest batch of companies “beating” the fiscal cliff tax on dividends. As a matter of fact, Oracle (ORCL) raised the bar of beating Washington’s tax grab by announcing it will be paying 3/4 of its 2013 dividend payout this month. Despite how “ahead of the curve” Washington and its policymakers believe they are, the movers and shakers are ready to react just as fast as they need to. Consequently, the resolution that eventually is approved will probably just end up hitting the taxpayer much more than any other entity. That’s the sad reality. But the show remains the same and the media will continue to paint the effects with the wrong brush. Bureaucracy wins and taxpayers lose. Again.
Individual Traders Vs. The Big Boys
Bloomberg ran an article talking about how complex the markets have become, but one of the biggest nuggets in the article was that in 2004, more than 80 percent of market volume was controlled by less than 20 percent of the participants. Today, high-frequency traders alone control more than 50 percent of the volume.
So as the business media glamorizes the business of trading making individual traders believe they can follow the advice of the gurus paraded up and down, the reality is the odds of making money in the markets has never been harder — from a trading standpoint that is. We have said it over and over again, trading requires resources: time, energy, discipline, focus, and capital that most individuals can not keep stocked for a long enough duration of time. I was able to stick to it for numerous years, and even after having been successful at trading, it still felt like an incomplete mission in life. The reality is the number of individual traders continues to diminish as the other players at the table continue to fortify themselves with every edge possible. Where the edge disappears is when investors find great income-producing companies they don’t have to trade in and out of every other day. This is where we all want to be in today’s ever-changing market environment.
Thanks for reading everybody. I’ll see you tomorrow!
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