‘Yes, I admit I’ve got a thinkin’ problem ...’
– Country song by David Ball

David Ball’s hit song could well be the theme song of investors who have been thinkin’ themselves into those nasty 99.9 per cent losses.

The financial markets are rigged to make traders think too much, but, in this game, thinkin’ is a surefire recipe for disaster.

So how does one solve a thinkin’ problem?

That’s easy. You become a cold-hearted robot.

Think about it (but don’t think too hard).

Where has being human gotten you in this bear market?

The markets love to play with your emotions, so maybe it’s time you gave the market something to think about.

Stop thinkin’.

And swallow that foolish pride that stops you from dumping your losers.

Folks can sling mud at crooked CEOs and shady accountants until the cows come home, but they’ll continue to get fleeced by Bay Street and Crook Street (formerly known as Wall Street) as long as they paralyze their portfolios with
analysis.

A robotic trader is oblivious to the wild gyrations of the markets, and even if the program was tricked by a
fraudulent balance sheet, the program would get you out of trouble on the first dip.

Think about it (but not too hard). The establishment could lie and cheat all it wants, yet the robotic investor would weather the storms by abiding by a rigid set of disciplinary rules.
The NO. 1 rule – and the most important lesson of this bear market – is to cut your losses at a specific point.

Clearly, the biggest blunder investors have made is thinkin’ themselves out of selling losers.

Instead of taking a loss of five to 10 per cent on losers through the discipline of stop/loss orders, the
emotional investor, stricken by an incurable disease known as human nature, averages down in a desperate attempt to recoup losses.

While the heartless ‘robots’ of the investing world were dumping Nortel Networks (NT-TSX) stock at $100 for marginal losses, the thinkers were holdin’ when they should’ve been foldin’.

Worse, many of them fell head-over-heels in love with Nortel, averaging down several times as the stock tanked to its recent price under the $2 range.

Last year, International Business Machines conducted a first-ever experiment pitting robots against humans in a commodities trading game in England.

Six ’bots’ were pitted against six humans who were amateur investors in trading commodities such as pork
bellies and gold. The robots were the clear winners, emerging with seven per cent more cash than the humans.

Perhaps IBM, the company that created Deep Blue, the robot that out-foxed chess master Gary Kasparov, could do something about its own deflated share price by creating a trading robot that could consistently beat the Dow while CEOs are carted away in handcuffs.

The cold reality of the financial markets is that the people who run some public companies and the accountants behind the numbers can’t be trusted.

But investors can stay in the game by placing stop-loss orders.

Generally, investors are advised to set a sell stop at somewhere between five and 10 per cent below cost.

If you find yourself cheating on this discipline, admit it.

You’ve got a thinkin’ problem.

So don’t think twice. Don’t even think once. Hire a robot to manage your portfolio.

* STREET TALK: “Why then is gold the unmentionable four-letter word of economics? Why, even today, does serious mention of gold brand the advocate in many circles as an ignoramus, a crank? The answer is three-fold: a misunderstanding of the role of money; a misreading of history; and, finally, a visceral revulsion to the notion that a metal can do a better job of guiding monetary policy than a gaggle of finance ministers, central bankers and well-degreed economists.”

– Malcolm Forbes, former publisher of Forbes Magazine.

* SAGE WORDS: “Capitalism without failure is like religion without sin. Bankruptcies and losses concentrate the mind on prudent behaviour.”

– Allan Meltzer, business guru.



HOT ALBERTA STOCK: Hurricane Hydrocarbons
HHL.A-TSX $12.71
Up $2.54 (+24.9%) on 1,850,400 shares (for week ending Aug. 2).
There's nothing quite like a share buyback to light a fire under investors. Hurricane's stock popped 31.9 per cent in one day (July 31) after the Calgary-based oil company announced it was buying back 5.25 million of its common shares. The company, whose operations are primarily based in the Republic of Kazakhstan, also announced quarterly earnings of $33.8 million or 42 cents per share.



COLD ALBERTA STOCK: Inventronics Ltd.
IVT-TSX 36 Cents
Down 16 cents (-30.8%) on 79,000 shares (for week ending Aug. 2).
These tech pennies ain’t from heaven. Shares in this manufacturer of custom enclosures for the communications and electronics industries continued to take a pounding after the Calgary-based company announced it was divesting itself of and taking a writedown on its British subsidiary, Eurocraft Enclosures, and consolidating all its Canadian manufacturing operations at its Brandon facility. The stock has been pummelled from a 12-month high of $2.25.