A Solution for This ‘Crazy’ Market
Wednesday, 10 June 2020
By Greg Canavan
PUBLISHER’S NOTE: While COVID-19 was ripping through the stock market in March, a stunning new opportunity was forming. An opportunity born on Wall Street…adapted for the Australian market…and being exploited by a handful of our paid subscribers to avoid catastrophe and make money during the biggest sell-off in our history… Learn more here.
I want to start today’s Insider with an excerpt from an update I sent to subscribers of my Crisis & Opportunity service yesterday. It’s important in the context of what’s going on in this crazy market.
This is one of the most valuable things you can understand in the investment game:
‘…The market doesn’t care what you “think”. It’s not interested in your opinion.
‘The market just does what it does. If you want to survive, you have to respect the market’s verdict.
‘Often, it’s only in hindsight that the market makes sense.
‘But given the market’s historic rally from the lows of March (especially in the US), I’m seeing an increasing number of people say that the market no longer reflects reality. They believe that its ability to act as a discounting mechanism (its ability to accurately price in the future) is broken.
‘Even if there is some truth to this, IT DOESN’T MATTER.
‘Unless you want to take your bat and ball and go home (and sit in cash), the market is all you have.’
The NASDAQ made a new all-time high on Monday.
Would anyone have predicted that during the pandemic panic? Was it even possible to predict it with any rational reasoning?
I doubt it.
What has happened over the past few months is truly extraordinary.
We have had an unprecedented global economic shutdown…which produced the most rapid stock market collapse in history.
Now, with the economy still only half functioning, stock markets are roaring back to life.
People who sold near the lows or were holding cash can’t believe it. They think the stock market is broken.
But there are a select group of investors who have done very well out of this crazy time.
They are the ones who didn’t ‘think’.
They didn’t have an opinion.
They didn’t try to impose their views, morality or judgements onto the market.
They simply respected its verdict and just went ‘with the flow’.
And it made a massive difference to their performance.
The best thing about this approach is that you can make more by doing less. Managing your money, as you no doubt know, comes with an emotional strain during times of volatility.
Do I get in, do I get out, do I stay in, do I stay out? It’s stressful. And if you aren’t great at controlling your emotions, the strain can take its toll.
The solution is to think and do less. Understand that the market is so complex that you can’t possibly comprehend how it works. As I often say to my subscribers, ‘embrace your ignorance’.
Knowing that you don’t know is one of the most liberating insights you can have, both in the market and in life.
In life, the benefit is intangible. But employed in the stock market, the benefits can be hugely (financially) rewarding. In addition, your investing experience will probably be a lot less stressful.
You simply have to let the market tell you what to do. You don’t think, you don’t consider, you just act.
The pros on Wall Street have been doing this for years. Put simply, rational investors have profited from the irrational, or emotional investor.
They do this by creating algorithms that tell you when to buy or sell. These algorithms are the result of price action, NOT personal opinion. And they are back tested extensively to ensure they are robust.
We know they work too.
That’s because we publish an algorithmic trend trading product designed by a former Wall Street professional. Algo Trend Trader has vastly outperformed the market over the last 12 months in the 10 stocks it follows precisely because it doesn’t take into account personal opinion.
The only thing it cares about is the price action.
When prices started to deteriorate in March, it got you out (and went short) and then when the market turned around in April, it got you back in.
There was no second-guessing about whether we would ‘re-test the lows’, how long lockdown would last for, or whether the Fed would destroy the dollar.
The market said buy, so it bought. All you had to do was follow the instructions.
Whilst past performance (actual or in back testing) does not guarantee future results, if the volatility of the past few months has left you confused and stressed about what to do, trading with the help of an algorithm may be the answer to your problems.
If you think you know better than the market, then fine. Just be prepared to be humbled at some point.
But if you’re interested in finding out about a more effective, less stressful way to invest, you should watch Woody’s just-released video today.
Click on the video thumbnail now…