The right theme can stop the sky from falling
Friday, 26 April 2019
By Sam Volkering
- Chicken Licken is back!
- The big themes of investing
- Markets continue charging
The US markets just hit new all-time highs.
Yep, folks you heard it here first. The sky is definitely not falling!
On March 20, 2019 Bernd wrote to you with the headline, ‘Maybe the sky IS falling’.
In it he described the story of Chicken Little. It’s also known as Chicken Licken and also Henny Penny.
As Bernd explained,
‘Regardless of the title on the cover — and a few divergent endings — the premise is the same.
‘After an acorn falls onto his head, a paranoid Chicken Little is convinced the sky is falling. And he enlists various feathered friends on his way to warn the king.’
The moral of the story is simple. One negative event does not make a crisis. And overreacting to every little bump can indeed land you in hot water.
You see, the story goes on to the point where Chicken Licken and his mates eventually get to Foxy-Loxy to warn him of the impending falling sky. Except Foxy-Loxy is too smart, he knows that’s not happening. Instead he invites them into his den to keep them safe and ends up eating them all.
Now, Bernd was talking about the property market when he referenced this children’s tale. And to be fair, he was right. But when it comes to the markets it would also be easy to think the ‘sky’ has been falling. Or indeed is about to fall. You could be Chicken Licken. You may have been Chicken Licken already for a few months or even a few years.
If so, there’s a good chance, figuratively speaking, you’re already in Foxy-Loxy’s den and most of the way towards being eaten. The markets haven’t been falling, aren’t about to fall and if you have eyes and ears, you’ll know they’re now pushing on to all-time highs — particularly over in the US.
Investing in these markets isn’t the easiest job in the world we might add. It takes the right knowledge and skill to make sure you’re picking winners. Trading in this market is even harder — and if you’re a trader then you really want to make sure you’ve got the right advice on the right moves to move in and out of positions.
I’m not a trader, but Murray Dawes is. In fact he’s one of the best market traders I’ve ever seen. If you were one of the few fast-acting enough to secure a spot in his premium trading service, Alpha Wave Trader, you would be aware of that. That likely doesn’t represent many of you, however. Due to the sensitivity of Murray’s recommendations, we’re forced to keep the number of his subscribers very low, and can only rarely open the doors to the service.
Now is one of those brief periods, so if you’re interested to see how one of Australia’s best professional traders works, click here.
I certainly take the same stance as Murray that there’s always money to be made in the markets. Trading is one way of making money from it, and another is more up my street, which is thematic investing…
Overnight the Dow Jones Industrial Average closed down 134.97 points, or 0.51%.
The S&P 500 lost 1.08 points, or 0.037%.
In Europe, the Euro Stoxx 50 index finished down 10.71 points, or 0.31%.
Meanwhile, the FTSE 100 fell 0.50%, and Germany’s DAX lost 30.56 points, or 0.25%.
In Asian markets, Japan’s Nikkei 225 is down 37.37 points, or 0.17%. China’s CSI 300 is down 0.97%.
In Australia, the S&P/ASX 200 is down 0.80 points, or 0.013%.
On the commodities markets, West Texas Intermediate crude oil is US$64.93 per barrel. Brent crude is US$74.21 per barrel.
Turning to gold, the yellow metal is trading for US$1,280.29 (AU$1,822.60) per troy ounce. Silver is US$15 (AU$21.35) per troy ounce.
One bitcoin is worth US$5,180.03.
The Aussie dollar is worth 70.24 US cents.
Find the themes, ride the themes
How to ride these market runs isn’t the easiest thing to figure out. After all, the truth is none of us really know day to day exactly what the markets are going to do.
We certainly apply experience, knowledge and our own particular methodology to make the best educated call we can make. But no one ever acts in the markets with absolute certainty.
Some like to use maths, algorithms and charting to make their markets calls. And then others like me take a more qualitative approach. More specifically I like to hunt out market trends that have the potential to deliver big returns on stocks that are ready to ride those trends and themes.
You might call it thematic investing. But for me it’s trying to figure out what our future world will look like, how we are going to get to that point, and what companies are going to drive it that everyday investors can get a slice of.
That’s why I enjoy being at the helm of Revolutionary Tech Investor (RTI) so much. We’re not far away from entering our seventh year of operation for RTI. We’ve had time now to really stretch our legs with some of the big themes of investing.
We’ve looked at mega tech trends and themes from 3D printing to augmented reality, the crypto explosion, self-driving cars, the cannabis revolution and cyber defence.
There are more we’ve been at the front of, and we’re constantly looking to new mega trends. Some of these include transhumanism, the integration of machinery into how humans work and move about in the world. And there’s the machine economy, the development of automated systems that transact and deal with each other isolated from any human involvement.
These sorts of trends are going to reshape the next decade of investment and trying to figure out how investors can profit from them, is one of the most exciting roles to have. But you also need to understand the sky isn’t falling.
When the mainstream is running around like Chicken Licken you need to channel your inner Foxy-Loxy. This isn’t the first time I’ve suggested to readers that the sky (markets) isn’t falling. In fact just over a month ago I said that the conditions we have could be a great time to really dig your heels into a long term investment strategy.
As I noted on 14 March in Money Morning,
‘Right now we want to be the foxy-loxy’s of this world. Our view is that the sky certainly isn’t falling, in fact the sky never falls. Sure there are times when it might feel like the sky is falling. And those times are when chicken-lickens are in full force.
‘But most of the time when the chicken-licken brigade gets going, you should channel your inner foxy-loxy because it can be a very lucrative time if you know how to play the contrarian view.’
And over the last month the Dow Jones Index is up over 4.5%, the NASDAQ Composite is up over 6.5%, even the ASX All Ordinaries are up more than 3.6%.
Those are by no means the kinds of returns we look for. When we hunt returns its triple-figure results at a minimum that we’re aiming for. But heck, for the kind of broad market results that the average punter gets starry-eyed about, that’s pretty good.
Still, if you subscribe to the mainstream view of the state of the markets you’d have missed out. They’re always reactive in their approach to markets. The follow the trends after they’ve taken hold. They don’t get out in front of them.
And the biggest trend we’ve seen is that markets in general aren’t about to capitulate and disintegrate. They will at some point; they always do. There’s always a future black swan event on the horizon. But my view is we’re nowhere near that yet.
Until that day does get closer, the longer you sit out, the longer you believe the sky is falling, the more you’ll miss out on the huge opportunities that sit in front of you.
The lesson to be learnt in all markets is there are always opportunities to make money. And in markets that continue to charge, it pays to be a bit Foxy-Loxy. To have a little bit of an appetite for risk…and Chicken Lickens.