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Stop Your Worrying, This Isn't What a Top Feels LikeBy
Thursday, September 15, 2016
That's all it took?
A couple of bad days in the market – after a long stretch of calm – and you think it's all over?
So you skinned your knee (so to speak). Big deal. We all have. It's part of playing the game.
Don't throw in the towel... Instead, get back out on the field. You have a lot more points to put on the scoreboard before the game is over.
All right, enough with the bad sports clichés...
You get my point. I hope you take my message to heart.
YOU KNOW WHAT A TOP FEELS LIKE. You went through one in the real estate boom in 2006-2008...
At the top in real estate...
Everyone thought they had their own spin on it... They thought they had their own unique way of making money that was somehow special to them. They didn't realize that, whether they were "flipping" houses or "developing" houses, all the strategies were essentially the same – in that they all relied on higher and higher asset prices to succeed.
THAT is what a top looks like. THAT is what a top feels like.
You might say, "Steve, but that was house prices. This is stock prices." If that's your argument, you're fooling yourself...
Investors had the exact same (delusional!) feelings about tech stocks in 1999 that they had about house prices in 2006-2008.
Look, you KNOW what a top feels like – so let me ask you, does this feel like a top in stock prices?
Is everyone optimistic about stock prices? Is everyone "in"? Is everyone talking about their "can't lose" stock strategies at cocktail parties?
If you can't answer yes, then this is not a top. This is not a moment like the one we had with tech stocks in 1999, or real estate in 2006-2008.
It's not.
This is not what a top looks like. Don't try to convince yourself otherwise. And invest accordingly...
Good investing,
Steve
Further Reading:
Steve believes stocks have more upside ahead. But when it comes to his personal investment style, he sits and waits for the next great buying opportunity... like the one he just found. Learn more here: The NEXT 'Fat Pitch' Opportunity Is Here... Don't Miss It.
"Stocks are knocking on the door of new highs," Steve wrote two weeks ago. "This scares most folks – they don't want to buy anything at record-high prices. Instead, they prefer to buy at new lows. But that doesn't mean you should follow them... " Get the full story here: Stocks Are Near All-Time Highs... And You Have Nothing to Fear.
Market NotesA CLASSIC EXAMPLE OF 'BAD TO LESS BAD TRADING' Today's chart paints an ideal picture of one of our favorite strategies at work...
Regular readers know that Steve coined the term "bad to less bad trading" several years ago. It involves buying assets that have gotten crushed and making massive profits as the market starts to return to normal – or when things simply get "less bad."
Right now, we can see a "bad to less bad" move in Brazil. As Steve wrote in May, the story in Brazil has been bad... including corruption, impeachment, a severe recession, the Zika virus, and more.
All of this turmoil caused investors to give up on the country's stock market. From 2008 through this past January, the iShares MSCI Brazil Capped Fund (EWZ) plummeted from around $100 per share to around $17 per share. But as things have gotten "less bad" in Brazil, EWZ has rallied... Shares are up about 85% since January and hit a fresh 52-week high earlier this month. It's a perfect example of the power of "bad to less bad" trading...
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