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My Latest Mistake – Please Learn From ItBy
Friday, January 30, 2015
"Today may be the very top in the U.S. dollar," I said on Fox Business two weeks ago.
I was wrong. I need to learn from my mistake...
If you want to get better at investing, you need to analyze your mistakes. That way, you don't make them again.
So let's take a look at what I did, and where I went wrong...
It turns out, two weeks ago was NOT the top in the dollar. Instead, the dollar has continued to "go parabolic." Take a look:
 My first mistake was that you never want to fight a "parabolic" move. Personally, I have had trouble with this one in my career... When you see an investment soar in an extreme way, the bust is often just as extreme – when it finally arrives. The trick is when that day arrives.
Parabolic moves can keep going, and going... You don't want to fight them. You can lose a lot of money, quickly, by betting against them.
My next mistake was this: You can't trade "value" or "sentiment" by themselves... Instead, you have to wait to have the trend in your favor.
Right now, sentiment on the dollar is at a record high – everyone loves the U.S. dollar. And sentiment on the euro is at record lows – everyone hates it. These sentiment extremes will change – very soon. And the way they will change will be through a stronger euro and a weaker dollar.
This should happen soon... But when? I can't know to the exact day (as I proved on Fox Business!).
It's smarter NOT to predict the exact day. Instead, you wait...
You use hindsight. When the trend has clearly changed in your favor, then you can make the trade. You might miss the first few percentage points of the move, but it is a much safer way to trade.
In the case of the dollar, I didn't have the trend yet... I just had sentiment. So I got it wrong.
As a newsletter writer, it might make for a great headline to call the top. But the reality is, you can still make plenty of money – in a much safer way – by waiting for the trend to go in your favor before making the trade.
So in summary:
Hopefully I will do these things the next time around. I learn more from my wrong calls than I do from my right ones. I strongly suggest you analyze each trade you make, to figure out what you could have done better.
That's how you get better as an investor... so do it!
Good investing,
Steve
Further Reading:
Steve occasionally shares his mistakes with readers so they can learn from them. Here are two of the most recent examples:
A Foolish Mistake by Me... Please Learn from It!
These two sentences have cost Steve more money in his investing career than anything... What I Learned Losing 50% – It's Happening Again Now
This mistake was from 10 years ago... And it still stings today... Market NotesIS THE ECONOMY REALLY THAT BAD? PART II Today's chart looks at another real-world indicator that's proving the pessimists wrong...
On Wednesday, we explained why the uptrend in the world's largest hotel chain shows America is doing a heck of a lot better than the pessimists would have you believe. If folks are taking business trips and vacations, we figure things "can't be all that bad" in the U.S. economy.
Today, we look at another one of our favorite real-world indicators, Automatic Data Processing (ADP). ADP is the country's leading payroll processing and benefits administration company. Its customer base includes more than half a million companies, with more than 80% of its business coming from the U.S. In short, ADP is a great "bellwether" for U.S. employment trends. If its customers aren't hiring, its business won't grow.
As you can see below, ADP's business is growing. Earlier this month, the company reported that December was the ninth straight month of at least 200,000 new jobs added in the U.S. All these new jobs have translated in a major uptrend in shares of ADP. Shares are up nearly 90% over the past three years and hit a new all-time high last week. It's further proof things "can't be all that bad" in America.
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