My apologies to the late Darrell Royal, the University of Texas football coach who used this saying often when defending his continued use of the “wishbone T,” an offensive football formation that some were always questioning. The saying has a valuable message that is applicable to many endeavors; simply, do not forget how you got where you are. It is very appropriate to investing strategies that have long-term success.
It seems that this simple, yet on-the-mark concept gets lost when it comes to making money in the equities market. The fortunate among us have enough experience and confidence in their methods that they do not let the short-term uncertainties of the market sway their investment strategies. We know that most of the short-term focus is merely noise and has no affect on the long-term supply and demand driven trends. This is the true advantage of following a rules-based technical model; it removes those most-often-wrong emotional decisions. Plain and simple – it gives you discipline.
Exceptional discipline and objectivity will keep you from falling victim to short-term emotion and chasing something new, even though you know your long-term methods are sound. The uncertainty of the market requires a methodology that allows you to participate in most of the good times and avoid most of the bad times. The only thing worse than being wrong, is staying wrong. So why do I believe information that does not hold up under scrutiny? Simply because we are human!
Being human has some real baggage with it, which makes discipline even more difficult. Behavioral psychologists will tell you that as human beings, we can remember significant facts about events of the past. However, our memories are tainted with our perceptions, our education, and a personal understanding of things in general. We cannot grasp an entire set of details surrounding an event that we do not know at the time, only the actual event itself. Reconstructing the past usually consists of combining a few significant facts and sprinkling those facts with lots of personal beliefs and opinions. This is quite natural and attributable to a human’s inability to deal with uncertainty and randomness. A detective will tell you that eyewitness accounting of an event must happen as soon as possible and that eyewitnesses must be kept separate from one another. This is because each one will associate personal understandings, education, and beliefs into their accounting of the event. Enough with the lesson about the human mind! What am I saying with all of this? Here is my point: It is foolish to count on your emotions in the moment when the going gets rough. That is why I follow my technically based investing rules. It is not perfect, but it is far superior to the short-term inaccuracies that are inherent to the human brain.
I know I have pounded this message often in these articles, but there is a reason. To be a successful investor over the long run, you must adapt to the belief that you cannot predict the market. You must use tools that remove your emotions from the decision-making process. I do not know how many ways I can say that, but I will certainly try a different way later!
When I was an aerospace engineering student at the University of Texas in the late 1960s, we were number one in the nation two years in a row when Darrel Royal was the coach. No, I did not take my slide rule to the games.
Please have a Happy Thanksgiving.
Dance with the Trend that Brung Ya,