Dear SlingShot Trader Subscriber,
If you’re like us, you’ve been getting magazines, investment reports and newsletters with predictions for 2012 splashed across the covers. Some believe the financial sector is going to have the comeback of the century, while others believe the financial sectors current woes are only just beginning. Some believe we are going to see a renaissance in the technology sector, while others believe the tech sector has seen its growth and is going to consolidate in 2012. Finally, some believe the Eurozone is going to pull out of its tailspin and come roaring back to life, while others believe the Eurozone is going to fall apart, the euro is going to collapse and the shockwaves will be felt around the world.
So what are you supposed to do? Which analysts and experts should you believe? Here’s the answer: all of them.
We know that sounds strange, but hear us out.
Paying Attention to Everyone
No single analyst is omniscient. That is a truth today and will be a truth tomorrow. We hope you approach any analyst – including us – with a bit of skepticism. In investing, a bit of skepticism is a healthy thing. It’s good to ask questions.
Now, when we say you should pay attention to everyone, we don’t literally mean everyone. That’s impossible. However, if you can find a few people out there that seem to have ideas and make comments that are thoughtful and avoid hyperbole, you’re off to a good start.
Here’s something to remember though. You need to find people to listen to that have different points of view. Don’t just read articles from one newspaper or watch programs from one TV channel. You need to diversify your sources of news and analysis as much as you diversify your investment portfolio. That means you need to read and listen to the ideas of people you agree with and those that you don’t.
The reason we think you should pay attention to people you might not always agree with is that it gives you ideas to consider that you may not have had on your own. It helps you avoid confirmation bias.
Confirmation bias is the process of only looking for people and ideas that reinforce the beliefs and biases you already have. For instance, if you think a bullish trade on Apple (AAPL) is a good idea, confirmation bias would lead you to read reports that confirm your point of view so that you can feel better about the investment decision you made.
Everybody struggles with confirmation bias. It’s part of our nature. Some struggle with it more than others, but everybody does to some degree or another. That’s why we think it’s so important for everyone to pay attention to both analysts who agree with your point of view and analysts who don’t.
The Bottom Line for Next Week
We don’t know where the market will be at the end of 2012. Nobody does. There are a few analysts whose predictions will come pretty close, but then those same analysts will completely miss the mark for 2013. That’s just how it goes.
However, we do know what we need to be watching – at least for the time being – and how to react to the news. We need to continue watching the developments in the Eurozone, we need to keep watching corporate performance via earnings announcements and we need to watch what the U.S. Congress does with taxes, the debt ceiling and next year’s election campaigns.
We’ll be with you every step of the way…but keep asking questions.
This Week’s Events
Here are some of the news events that we may trade in the next week or so. We’ll be discussing some of these in tonight’s webinar.
12/29 – Weekly Jobless Claims
12/29 – Chicago PMI
12/29 – Pending Home Sales
1/3 – ISM Manufacturing Index
1/3 – FOMC Meeting Minutes
When it’s time to open or close a trade, we’ll send you alerts via e-mail. You also can sign up to receive text messages regarding our trades. For more info about our SlingShot Trader portfolio, you can read trade alerts here and view our portfolios here. You can also see more trade-specific details by clicking on the trade links below.
These are the SlingShot Trader positions we opened during the past week of trading that we have not yet closed.
Cal-Maine Foods (CALM) — On December 27, we recommended you to “buy to open” the Feb 35 Puts for $1.35 or less.
These are the SlingShot Trader positions we closed during the past week of trading.
Bed Bath & Beyond (BBBY) — On December 22, we recommended you “sell to close” the Jan 60 Puts. We closed the position for $2.60 for a profit of 61.49%.
Top Trades Now
These are the current SlingShot Trader positions that we still recommend getting into now, assuming you haven’t already bought a full position.
Cal-Maine Foods (CALM) – See Positions Opened above.
Webinar Preview: Join Us Tonight at 6 p.m. ET
Every Wednesday at 6 p.m. ET, we host our live webinar, in which we’ll review this weekly newsletter, discuss coming events in more detail and walk through our Top Trades. We also encourage you to submit your questions live during the session. We want to do everything we can to help you become a successful options trader, which is why you’ll have live access to us for an hour every week.
And if you have any questions or comments you would like to send us in advance of the live session — or anytime during the week — you can write to us at email@example.com.
If you can’t attend the session live, you can watch the archived version on our website in the “Live Weekly” section. It’ll typically be posted within about two hours of the end of the live session.
John Jagerson and Wade Hansen