Wall St. is driven by just two emotions: fear and greed. Pending on the degree to which you succumb to these emotions – it will have a profound impact on your bottom line. All too often, most investors will do two things: (i) buy when there is market greed; and (ii) sell when there is fear. It’s the opposite of what you should do. However, this is something you need to master if you are to be successful in the game of asset speculation.
"Investing Lessons"
Lesson: Don’t Try and Pick ‘Tops or Bottoms’
Everyone makes mistakes. In fact, I love ‘collecting’ mistakes – whether they are my own or from someone else. It’s the only way I learn. This post shares two ‘mistakes’ from a popular media personality. His name is Jim Cramer who hosts a show called “Mad Money”. Earlier this week he said “the bottom is in for CrowdStrike”. Big call given recent events. Fast forward a few days and the stock is 16% lower than when Jim called the bottom. So what can we learn from this?
Quarterly Real PCE Up YoY… As Savings Fall
The market received three important data points this week – inflation, wages and consumer spending – and it was mostly good news. First up, inflation continues to moderate. The Fed’s preferred inflation index – Core PCE – showed prices increased at a moderate pace for June— confirming excessively high inflation is behind us. However, prices are still ~30% higher than 3-years ago… they’re just rising at a slower pace. Whilst inflation is important – I wanted to know if consumers are still spending? The answer is they are – and by whatever means possible. They are drawing down on their savings and ramping the use of credit cards – which has seen card delinquencies hit decade highs. But from equities perspective – higher spending is good news. This feeds the ‘soft landing’ narrative….
The Three Stages of a Bull Market
Charlie Munger once warned us when wishful thinking takes hold – investors tend to believe that good times will be followed by more good times. This mentality feeds on itself – driving momentum – pushing prices higher. It’s what fuels the final stages of a bull market. Attributes such as independent thought, logic, rationale and objectivity give way to herd behavior. That’s when your internal alarm bells start ringing… and you start thinking differently from the crowd. Very few people have the ability to do that… but it’s what’s required.
For a full list of posts from 2017…