This post was originally published on this site
Time to buy! Time to short!
Time to load up. Time to get out.
How about it’s time to be patient? Is anybody patient any more?
I’ve talked before about a book that Jim Cramer gave me when I was launching my hedge fund back in 2002. “The Winning Horseplayer,” by Andrew Beyer, is about gambling at the racetrack — and more. Beyer is all about maximizing his upside exposure when he is really confident that he has an edge and there’s huge potential returns, cutting back when he is less confident and/or the returns have less upside relative to the risk, and getting the heck out and not trying to bet when he feels like he doesn’t have any edge and/or there’s little upside potential.
As that relates to the stock market, I am at that spot right now. I don’t feel the upside potential is high enough to be aggressive right now. There is not a whole lot of excellent value out there. The market hasn’t crashed like it had the last time I got aggressively long. It’s not like it was in 2010 when I was aggressively long and buying call options, buying stocks, getting aggressive and more than 100% long.
Then again, it’s not like it was in October 2007, when I closed my hedge fund and co-hosted a show on Fox Business Network because I just really didn’t like the setup of investing in technology. I didn’t have enough confidence in my own short-selling skills to try to bet against the market, so I just got out and went to TV.
Where we are right now in the cycle is that I am not wildly bullish.
I don’t think we have a huge edge like we did in being able to buy Facebook FB, +0.08% at $20 when everybody hated it and nobody thought the mobile app revolution was going to be billions, trillions of dollars in size like it has become. That’s when we were buying these things. Now everybody does believe in Facebook and the app revolution, and the stock has gone from $20 to $140.
The flip side is that I am not out there shorting everything either.
Richard Thaler: Here’s the best investing strategy
Professor Richard Thaler, an expert in behavioral economics, talked to MarketWatch about his ‘lazy’ investing strategy that allows investors to maximize their returns while doing very little.
So patience is the best trade right now.
I continue to think we have a bubble-blowing bull market right now. I want to continue to own some of our best Revolution Investing stocks. We should sometimes take some profits, trimming back a little. But I’m not ready to get net short yet.
I have got my ear to the ground and I am making sure there is no black swan about to crash all the major stock-market indexes, from the Dow Jones Industrial Average DJIA, -0.13% to the S&P SPX, -0.25% to the Nasdaq Composite COMP, -0.24% If I thought there was, I would probably be looking at a great short opportunity.
Someone telling you to be patient can be a very valuable thing for those who endlessly overtrade and make too many moves or chase the next swing. Let’s not force the next trade because you need an idea.
Patience is a great tool that is all too rare these days.