| Thursday, November 6, 2014 | Issue #2412 | |
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How Smart People Become Fools in Just Two Weeks Alexander Green, Chief Investment Strategist, The Oxford Club
 Market timing - trying to jump into the market for the rallies and out for the corrections - is a loser's game. But October offered a prime example of just how rapidly that can become apparent.
The Dow hit an all-time high of 17,389 in mid-September, then began to slide. In early October, it became a rout. And by mid-month the market had given up its entire gains for 2014.
A good friend and stockbroker called to tell me his clients were in a tizzy. Many could not be persuaded not to sell. So they did, promising that they would get back in "later, when prices are lower."
Only it didn't work out that way.
Although there was no particular news to justify the rebound - just as there was no particular news to justify the correction - the Dow finished the month at a new all-time high.
The sellers missed a 1,000-point rally... in just two weeks.
My friend the stockbroker says those clients are now either furious or ashamed. Or both.
THE NEXT PHASE OF THE INTERNET IS COMING
So far, the Internet has gone through two phases. In the first, hardware companies like Hewlett-Packard shot up more than 2,640%. In the second, dot-coms like Amazon turned every $5,000 invested into $100,000. Now, the next phase of the Internet is about to begin...
And just like the first two phases, this one will make a few ahead-of-the-curve investors insanely rich. To find out how you can become one of them, click here. | |
Just Can't Be Done
It's a story as old as the financial markets themselves. But here's what these folks never seem to appreciate. What they're trying to do isn't just hard. It's impossible. And it's either arrogance or ignorance to believe otherwise.
Sure, anyone can make a good guess. But no one consistently calls the market's turns.
How could they? The stock market represents the best estimates of self-interested investors everywhere.
Every day people are looking at interest rates, inflation, legislation, commodity prices, industry trends and government statistics. They are talking to customers, suppliers, employees and competitors. They are watching insider filings with the SEC. Only after gathering and considering all this information do they risk their hard-earned capital.
The Height of Hubris
So when you hear someone say - or act as if they know - "the market will rally from here" or "the market is going to crash," they aren't just saying they know more than anyone else. They are saying they know more than everyone else.
Now that's chutzpah.
There are times, of course, when you shouldn't listen to "everybody." It's when the crowd becomes a mob, motivated not by reason but emotion.
When is that? When you see extreme valuations in concert with extreme sentiment. In other words, high valuations and giddy optimism or low valuations and abject pessimism. The peak of the real estate bubble and the stock market trough during the financial crisis are two textbook examples.
But we don't have extreme valuations and sentiment today.
We have slightly higher than average valuations but no euphoria about the future. Indeed, most Americans claim the economy is still in recession and the outlook is miserable.
That's a good sign for the stock market. So stick with your stocks. But be sure to run trailing stops to protect your principal and your profits - and diversify outside of equities.
Because October - historically the cruelest month for investors - just demonstrated again that if you think you know what the market is gonna do next, you really aren't thinking at all.
Good investing,
Alex
P.S. I believe we're on the cusp of a new Golden Age for investors. And March 11-14 at the beautiful Renaissance Hotel in St. Petersburg, Florida, dozens of other analysts and I will discuss how to profit from it. It's all part of the 17th Annual Investment U Conference, our most important event of the year. To learn more, click here. | |
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The Death of an Industry
 When the horse and buggy "died out," investing in the automobile business could have turned $2,400 into $14 million!!!
When computers replaced typewriters, it happened again.
And when MP3s replaced CDs, a whole new crop of investors got filthy rich.
Now, these are all extraordinary examples of legendary innovations. Investing stories like these don't happen every day (or every year for that matter)...
But the truth is, we believe the next great moneymaking opportunity could be upon us right now with "The Death of Cable TV." Here's why... | |
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What season are we in? Yep, sports fans, it's football season. And Matthew Carr is scoring touchdowns with one company that caters to our nation of sports nuts. Find out who it is by subscribing to the premium version of Investment U. Just click here. | | |
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Travel website TripAdvisor (Nasdaq: TRIP) is getting hammered today after the company missed on earnings. Let's see how it performs on the Investment U Fundamental Factor Test. Read On... | |
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It doesn't get much more "first class" than this. In mid-October, General Dynamics (NYSE: GD) announced the release of two new Gulfstream business jet models. Before you take a ride on a big jet plane, here's the rundown on where the market and manufacturers are headed. Read On... | |
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The People's Liberation Army is covertly bringing gold into China to hide in its central bank "off the books." In this must-see interview, the CIA's Financial Threat and Asymmetric Warfare Advisor reveals why many in the U.S. Intelligence Community fear this secret stockpile will soon be used to launch an unstoppable attack on the U.S. dollar.
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