Is The Stock Market Even Open?

This is about all that is going on today, that and the earth shattering news from Ford.

I can't even find any day baseball to watch.

All in all though being able to take a day or two off, mentally, is always a good thing for investors and traders alike.

I know from emails, comment and client questions that people really fixate on the very short term. One of the reasons I think top down with big themes is an easier way to go is that big themes take a long time to play out.

For example, most clients have exposure to China one way or another, and no I do not count a US multinational doing business as exposure. The China theme is big, obvious, volatile at times and will happen over time. Because the theme is likely to last longer than the rest of this decade, a quick move down is unlikely to ruffle my feathers.

Not every theme or holding is a five year idea but if you buy a stock with a two year time horizon, a bad week shouldn't necessarily send you fleeing from the name either. This ties in with knowing what is moving your stock. If every Chinese stock corrects by 15% and the name you own does the same thing, it probably is not a sell.

To be clear I do actively manage these things though. I was very public about reducing exposure to China in April.

If on the other hand if every Chinese stock goes up by 10% and your stock drops be 2%, you may be in the wrong name.

This type of thinking is why I am not a fan of blindly setting an 8% stop. In the example above where every Chinese stock drops 15%, presumably you chose the one you thought was the best one. So if you get stopped out do you pick one that was previously inferior? Do you buy back the same name? What if the point where you get stopped out is the low? What if you buy back and it keeps dropping? Given this minefield of obstacles how often will you get this correct?

Plenty of people can nail this sort of thing but it is very difficult to do which is my point.