Wow… what a week.
It was inspiring to be in Vegas amongst so many amazing people and to hear so many of you share with us what a positive impact TradeStops is having on your investing. Here are a few of the quotes I can recall off the top of my head:
- “You guys really saved my bacon – especially with energy and natural resource stocks.”
- “I was paralyzed with indecision as an investor. Now I’m starting to make intelligent and thoughtful decisions. I see the way forward… and I’m loving it.”
- “Not using your software is the biggest mistake I’ve made in my life. How do I get started?”
- “I’ve been using your SSI filters on my newsletter recommendations – only buying stocks that have a green thumbs up – and I’m up on 8 out of my 9 stocks in this challenging market.”
Hearing so many of you share your stories has renewed my conviction that we’re doing the right thing here at TradeStops… and inspires me to do even more.
Let me take a minute right now to share with you all that I really see TradeStops as a collaborative venture between all of the TradeStops stakeholders – owners, clients and employees. I see it as a sort of crowd-sourced portfolio management platform.
A quick but relevant aside here … far and away the most inspirational presentation at the conference last week was from Mick Eberling – the founder of Not Impossible Labs. If you have never heard of this guy, you’ve got to check him out notimpossible.com.
After seeing Mick’s presentation, it was clear to me what my personal “not impossible” mission was – to create services that enable individual investors to beat the markets. Easier said than done! I’m definitely going to need help with this one.
From the beginning my inspiration has been to see individual investors get a fair shake in the markets. I’ve seen too much of the brutal realities that many investors experience. One gentleman who approached me at conference last week was practically despondent about what had happened to him in the markets. I told him that he wasn’t the only one. We’ve all been there. Everyone has been humbled by the markets at one time or another.
Get yourself up, dust yourself off and get back in the ring – but maybe with a little different game plan this time … or maybe with a game plan for the first time! There’s no shame in getting knocked down as long as we learn from it … and get back up. It’s nothing personal.
In fact, behavioral science is increasingly supporting the “impersonal” nature of why we often are our own worst enemy when it comes to investing.
It boils down to the fact that we’ve got at least two different “systems” or “selves” operating within us at any given time. There is an “automatic” self which is adept at making quick and instinctive decisions. In fact, calling these responses “decisions” is giving them more credit than they deserve. They are decisions in the sense that they resolve a choice but they’re more akin to reactions or reflexes than to what we typically think of as a decision.
In contrast to the “automatic” self is the “conscious” self. The conscious self is where we carry on conversations with ourselves about our aspirations, motivations and intentions. We make decisions about things such as wanting to lose weight, exercise more and be disciplined investors. Unfortunately, the automatic-self isn’t always at the table when the conscious-self cooks up its plans.
Behavioral scientists have different ways of describing this “divided” self. Daniel Khaneman uses the very neutral terms “system 1” and “system 2” in his outstanding book Thinking Fast and Slow. I picked up the terms “automatic-self” and “conscious-self” from an excellent book I recently picked up called Rewire: Change Your Brain to Break Bad Habits, Overcome Addictions, Conquer Self-Destructive Behavior by Richard O’Connor, PhD.
There are various theories as to why we have two completely different and separate decision making systems within us. Some folks theorize that it’s evolutionary – our “older” brain (limbic system / amygdala) were tuned toward the survival instinct while the “conscious” brain (cerebral cortex) is a more recently developed decision making system.
Whatever the reason, the bottom line is that it’s nothing to feel bad about! It’s not personal. It’s just something to understand and learn to work with.
Thankfully, it’s increasingly easy to understand how we make decisions and how to go about making adjustments to our decision making processes. The two books mentioned above are a great place to start.
And repeat after me… “Successful investing is not impossible!” You can do it.
Finally, I’d like to take a few minutes to update you on what my indicators are saying about the broad market and to share another new investment idea.
The S&P 500 is continuing to bounce strongly off of the recent lows. We’re not out of the woods yet by any means but the recent price action has been constructive.
The US dollar index is moving sideways – not giving a very clear indication of the next big move.
Many intelligent people believe that the dollar will surge higher from here – in a positive feedback loop of increasing interest rates and offshore dollar repatriations. It may still do so but I’m not so sure. The major time-cycle in the dollar is presenting some serious headwinds to the “surging-dollar” thesis. I’m personally looking for the dollar to bottom in late 2015 or early 2016.
Crude oil (and energy in general) continues to look like the proverbial hot-stove that you don’t want to touch twice.
Gold has recently been showing signs of life, popping above its Smart Moving Average for the first time in six months or so. It will probably take a few months and a move to 1,400, however, before gold would trigger a bona-fide Re-Entry Rule.
Each week I’ve been trying to bring one or two strongly performing stocks to your attention as a counter to the market doom-and-gloom that many of us are getting hammered by.
Our strong stock of the week this week is Broadcom (NASDAQ: BRCM). Broadcom last triggered a Re-Entry Rule in mid-2014. It recently dipped into its Low Risk Zone a couple of times in the past month. The Smart Moving Average is trending up. Look out above!