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You've Got to Feel Vindicated

By Dr. Steve Sjuggerud
Monday, April 15, 2013

"You've GOT to feel vindicated, Steve!" geologist Matt Badiali said to me yesterday.
"You're IN Japanese stocks and OUT of gold stocks," he continued. "Japanese stocks keep going up, and gold stocks keep going down."   
What was I vindicated about? It was my investment philosophy...
Many years ago, I shared what I think is a major secret of successful investing with Matt. In his career, he's found this secret to be exactly right – and moneymaking. You should be using this idea for profit, too...
Years ago, I explained to Matt that investments can (and often do) soar higher than is rational... higher than anyone can imagine.
The biggest gains of my career have come by simply NOT SELLING the moment things appear irrational.
Japan is the best example today...
Japanese Stocks Have Soared 50% in Five Months
I guarantee that most investors think: "It's gone so high, so fast... it has to end soon!"
No, it doesn't...
The big trend ends when it ends... not when you think it should end. It is not a predictable thing.
Stocks can (and will) go higher (and lower) than most people can possibly imagine. Trends can (and do) persist beyond reason. It is what it is... but it is true.
Many smart people have a hard time with this concept. It's not rationally explainable (other than to say that "people act irrationally" in the markets). I know that it's not "rational" for stocks to rise 50% in five months like they have in Japan.
Every "highbrow" analyst says Japanese stocks have to sell off, that they have to give back some of those gains. Sounds smart. But it's been wrong. The difference between those highbrow folks and my readers is... my readers are making REAL money in Japan.
Japan's Nikkei stock index is up over 50% – just since its November 2012 lows – and in my True Wealth newsletter, we're going to keep holding.
The highbrow investors are trying to tell the Japanese stock market how it's supposed to act. But the thing is, the market isn't listening to them. Will the market soar beyond reason? Heck, it already has. And I believe there is much more to come!
Will we sell Japan if our trailing stop is hit? Absolutely! I am not a fool. I am not afraid to sell. On the contrary, I can sell without my pulse going up a beat... When it's time to sell, I sell. No problemo. And my subscribers will pocket a lot of money in a relatively short period of time, on Japan's "irrational" move.
Investments often rise farther and fall farther than is rational... farther than you can possibly imagine. Many smart investors don't want to believe in it. The only little problem here is, it is true. Markets do go higher (and lower) than most anyone can imagine.
You can 1) choose to fight this idea. You can buy more of something that is crashing, like gold stocks, losing money all the way down until you're hopefully proven intellectually right... even if your account statement is lower.
Or you can 2) choose to not fight it and go along with it. You can ride investments like Japanese stocks to foolish heights, making a lot of money along the way.
For some crazy reason, most people prefer the first option – they choose to fight it. They hope to win some intellectual battle.
Me? I prefer to do what's working and STICK WITH IT. I've found I can make the most money when it makes the least sense to stick with it. (And because I KNOW it makes no sense... it's easy for me to sell when the time is right.)
If you want to make hundreds-of-percent gains in an investment, you can't sell at the first sign of a profit. You have to hang in there.
Which do you do? Do you fight it? Or are you willing to stick with it?
Which should you do?
Think about it...
Good investing,
Correction: In Friday's DailyWealth, we noted that a municipal bond fund like IIM is a safe choice for up to 5% of your savings. We should have said it's a safe choice for up to 5% of your whole portfolio. We believe it can represent a larger portion of your cash savings allocation.

Market Notes

It's a bull market...
Indonesia Fund (IF)... Indonesian stocks
iShares Japan (EWJ)... Japanese stocks
iShares Singapore (EWS)... Singaporean stocks
iShares Malaysia (EWM)... Malaysian stocks
iShares U.S. Real Estate (IYR)... real estate stocks
iShares U.S. Consumer Services (IYC)... the American consumer lives on
iShares U.S. Consumer Goods (IYK)... the "basics"
iShares U.S. Financial Sector (IYF)... financial stocks
iShares U.S. Telecom (IYZ)... telecom stocks
iShares Nasdaq Biotechnology (IBB)... biotech stocks
PowerShares Media (PBS)... media and entertainment
PowerShares Aerospace & Defense (PPA)... guns, planes, bombs
PowerShares Buyback Achievers (PKW)... shareholder rewards
PowerShares Pharmaceuticals (PJP)... Big Pharma
SPDR S&P 500 (SPY)... large-cap stocks
SPDR Utilities (XLU)... utilities stocks
SPDR International Health Care (IRY)... health care stocks
CurrencyShares Australian Dollar (FXA)... Australian dollar
Cambria Global Tactical (GTAA)... following uptrends

Kinross Gold (KGC)... gold miner
Barrick Gold (ABX)... gold miner
Silver Standard Resources (SSRI)... silver miner
Ecopetrol (EC)... Columbian oil producer
National Steel Company (SID)... Brazilian steel producer
JC Penney (JCP)... struggling retailer
U.S. Global Investors (GROW)... asset manager
CurrencyShares Japan Yen (FXY)... Japanese yen

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