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Knowing 'The One Thing'By
Thursday, September 8, 2016
"Steve, you have a unique ability to find the one thing that matters in the markets... You focus on that, and you forget about all the rest."
One of my mentors told me that, and I took it as a huge compliment.
To make money, you need to have conviction in an idea... And you need to have courage to stand by that idea when times get tough. Of course, you also need to know when to cut your losses when you're wrong. But that takes conviction, too.
If you have that, you will make A LOT of money.
The problem is, having conviction is TOUGH! Most investors are wishy-washy. They don't have conviction.
But me... I find conviction by figuring out "The One Thing."
I want to find the biggest thing that matters to the markets. I want to know "the big idea" that is actually affecting stock prices.
Since 2009, I've said, "'The One Thing' is interest rates." This has been our script for seven years...
We got it right. Most interest rates around the world are at record lows today. Negative interest rates – unthinkable just a couple of years ago – are now normal. (Thankfully, negative rates are not here in the U.S. – yet.)
We got "The One Thing" right, and we basically ignored everything else.
There were plenty of reasons to be worried along the way... a continued European crisis... the flash crash of 2010... a downgrade of U.S. debt... and soaring then crashing oil prices... just to name a few.
But there are always a hundred reasons why you should not make a trade. You can always find a reason to chicken out. Having an idea – and conviction – that's the hard part.
We've been investing based on our "record-low rates will lead to record-high asset prices" script for seven years. So the question is this... Has anything changed? Or are interest rates still "The One Thing"?
To me, the answer is clear...
The 10-year U.S. bond rate has hit record lows. And again, negative interest rates have become common around the globe. Low rates are clearly still "The One Thing" driving the market higher.
There are reasons to be fearful today. We're nearing a very uncertain U.S. election. Economic growth continues to crawl forward. And stock prices aren't nearly as cheap as they were a few years ago.
But none of this matters to me. I have conviction because ultra-low interest rates continue to be "The One Thing."
That means stock and real estate prices in the U.S. can still rise much further from here...
Good investing,
Steve
Further Reading:
Investing legend Bill Gross is worried that near-zero-percent interest rates are a major problem. "Gross will be right... someday," Steve writes. "However, don't let this keep you from making money before that day gets here." Get his advice here: The Problem With the 'Cassandras.'
Stocks are near all-time highs. But Steve says that, based on history, you have nothing to fear. Learn why here.
Market NotesONLINE SHOPPING IS CRUSHING MAJOR RETAILERS Today's chart highlights a major shift in the shopping habits of consumers...
For decades, Americans bought their clothing and electronics at shopping malls anchored by retailers like Sears Holdings (SHLD). But these stores have suffered in recent years as more and more people have started to do their shopping online.
One of the biggest benefactors has been online-retail giant Amazon (AMZN). The company started as an online bookstore in 1995 but has evolved into a one-stop shop for just about everything you can imagine, from shirts and shoes to toys and exercise bikes, even groceries.
Yesterday, Amazon shares hit a fresh all-time high. They're up more than 100% since the start of 2015. Meanwhile, Sears continues its slump. Its stock is down 66% in the same span. As more folks turn to the Internet for their shopping needs, expect this trend to continue...
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