I attend investment seminars as half-monk, half-hit man. My time is a precious commodity, so if you are a speaker and see me in the audience, be prepared. My hot button is when speakers show a few elaborate slides, “share” their four favorite tenets to successful investing and then launch directly into their marketing pitch. They act as if they’ve given you the keys to the kingdom, proving their brilliance and justifying your attention. And those four tenets are invariably the same:
History matters because markets do indeed repeat themselves. John Kenneth Galbraith was interviewed in the PBS documentary, The Crash of 1929, and he observed that every 30 years or so we predictably have a major market correction because that seems to be the length of time it takes each generation to forget the lessons of the previous generation.
Upfront, it’s important to note that unlike most investors who hear asset allocation and conjure up three asset baskets (stocks, bonds, cash), Tensile Trading presents an exhaustive all-inclusive buffet of 59 different asset classes from which you choose. Our book also shows to what extent each of these various assets classes is correlated to the S&P 500.
Straight from the pages of my own trading journal. These are my charts from all the market corrections since 1981. Here’s why I want to share these with you.
The beauty of technical analysis is that it represents human emotions expressed by the buying and selling behavior of investors – emotions which are predictably repeated in times of crisis and have not changed over time. In the midst of the present correction, I find that looking back at these charts stops me from doing anything rash or stupid.
The reality is that markets operate within the law of groupings. This is precisely why I have formatted my unique chart view in a pull-down menu under ChartStyles. You simply click on “Gatis Roze” at the bottom of “Predefined Settings” and up pops the Tensile Trading analysis format that clearly shows the following:
This phrase is most often heard in reference to lawmakers and bureaucrats in Washington, DC, but I think it’s an appropriate reflection of what many investors struggle with as well. As an investor, you’ll seldom be destroyed by outside forces. If you falter and lose your assets, more often than not it will be because you ignored your own rules and disciplines, thereby destroying yourself from the inside.
It’s been my experience as a full-time trader over the decades that investing muscles need to take a vacation regularly. I’ve learned the hard way that vacations must be part of my money management routines. If I procrastinate and wait until I realize I need a vacation, the markets inevitably will have already told me the same thing in subtle ways. By then, it will have cost me money. My advice to you is to extract yourself from the investing-is-life box before reaching this point.
Charts I'm Stalking: Action Practice #19: Sector Funds & Their Top Holdings Offer Many Profitable Insights
It’s hard to believe but exchange-traded funds (ETFs) have been with us now for 24 years. Who would have guessed? Perhaps John Bogle.
As a rule, investors buy Sector ETFs to smooth out the ride and decrease volatility. The classic measurement of volatility is, of course, the statistical measurement of standard deviation which shows investors how far a series of returns swings from the average returns over a time period of their choosing.
Remember the bygone advertisements from years past about hair replacement? The gentleman stares into the camera and says “I’m not just the president of the Men’s Hair Club, but I am also a client.” Our ChartPack deserves a similar endorsement. “I’m not just the creator of the Tensile Trading ChartPack, but I am also a daily user.”
Ninety percent (90%) of Americans believe that they are above average drivers. Multiple studies have corroborated this impossibility over the years. I’m certain that the equivalent surveys of American investors would yield a similar fanciful number.
It reminds me of Garrison Keillor’s radio show featuring Lake Wobegon — the fictitious midwestern town where all of the children are above average. My point being that most drivers and investors — like those Lake Wobegon kids — believe they are exceptional. When you have a Ferrari for a brain but brakes made for a bicycle, you are dangerous — whether driving or investing.