Hey, everybody. Happy Friday. Today would probably be a shorter lesson than normal just because I think I’ve said everything that I want to say. But there is one thing that I wanted to speak on as a follow on from yesterday, and that is if your research is poor or if you don’t really know what you’re looking for, you’re not going to find it, right? It sounds like one of those peppered farm commercials. Stocks, equities are secular. Commodities are cyclical. Both can trend if you’re looking for names that are winning, one way to find the names is to research and see which sectors are hot. The sectors are hot because of the cumulative effect of the names in the sector.
You could avoid things like going to, here’s something to do that’s really stupid. Go to the worst sector and then try to find quality names or names that you’re familiar with there, because again, you think cheaper prices are more value. You’re not going to make money that way until you have to wait too long. Finance applied Microeconomics has one tenant. Well, there’s a couple, but one of the most important is cash has time value. So if you’re trading, not investing, look, if you want to put some of your money into an investment and you want to buy straw hats in winter, that’s one thing that’s not trading though. So keep that in mind. Cash has time value. You have to turn a dollar into $2, you see? So don’t take this ideology of buying straw hats in the winter and try to apply that into the trading world.
Now you’re mixing religions, right? So that’d be like a Catholic going to five masses a day. You could do it, I suppose, if they’re even available in the same time zone, but I’m praying like a Muslim. But the idea being is you can shortcut. I don’t want to say hack because I don’t like the idea of hacking. I think you have to put in the work. You have to act intentionally, but there might be names that you don’t even know of. You don’t know what the companies do, which is fine. If you’re not a fundamentalist, what do you care? Anywhere? You’re looking for waves to surf and there’s thousands and thousands of companies aside from the seven dwarfs that are the darlings of today, you can’t get hung up in that, right? We had the four horsemen, you had the fangs. Those are all just marketing shit to keep you ratcheted in, to entertain you.
And I guarantee you there’ll be more. Someone wrote in, I don’t want to point out their name, but they talked about they’re losing money in crypto. Well, the thing is that it’s very much out of favor. So when you’re a fan boy, I think is the expression of anything. Could be sugar, could be Nvidia, could be trading zero days to expiration options like to meet those can become sucker betts because you’ve lost your objectivity because of what you think of what’s going to happen and you want to be part of that. That’s fine for investing. But if the sector like crypto is in the toilet, it’s okay to stay away for a while. Again, why cash has time value. Don’t tell me you’re trying to trade and you don’t know the basic tenants of finance, and I’m not picking on you. Maybe it didn’t occur to you, but that’s what we’re doing, right?
That’s why you put money to risk, even as an investor, which is a trader with no exit strategy is to outperform cash. There’s cash as inflation, and so you need to get a rate of return that’s at least in line with inflation else. You lose your wealth, you lose your purchasing power. And for the folks that we talk to who have eight, nine figures of wealth, they know their quality of life is very high, but they don’t want to see 150 million in today’s dollars. Only have the purchasing power of 75 million in the years to come. Why? Well, because the rule of 72 works. When you think about inflation as well, how long would it take you to lose half of your purchasing power? So you can think about that. So look for the best sectors and then call up the charts of the companies in that sector. They might not be sectors that you go to. They might not have anything to do with ai. I don’t have any positions in crypto, so maybe it’s going to bounce, maybe it’s going to come back. Maybe all that smart contract stuff, it seems so super nerdy and technical and interesting, but again, if we can’t describe how it’s going to help mainstream America right here, right now, then who caress about how cool it is? It’s like a 1974 pet rock. It’s kind of cool technology and maybe it has applications, but my goodness,
If the sector’s not moving, don’t try to find the high flyer in the worst sector, you’re better off finding the dog in the best sector. That’s how Julian Robertson and some of these folks did their equity pair trades where they were long short, they went to the best sector and found the best names and went long. They found the ones that were weekly performing in the best sector and they took some of the vol and the sting out of their portfolio by actually selling those short. So you can kind of borrow from that and make it your own. Go to the best sectors, find the best names, go to consumer staples, for example, and look and see what’s moving there. Go to any other chip making is kind of attached to ai, but find something that seems esoteric to you, something that you don’t know anything about. Why? Well, again, because you’re not trading like a fundamentalist, and if that hits you right between the eyes because you’re suckered into this AI stuff, again, you have to be promiscuous as a trader. You can’t get suckered in and fall in love with the reflection of the N V D A ticker symbol.
You have to be objective. You’ll do a lot better if you don’t try to focus on one particular thing because the magic or your feel might come from a security that you’re not looking at and you’re only going to know from experimentation. How do I know? Well, because what I did, so I’m just trying to give you some objective feedback here. You don’t necessarily have to like it. And again, I’m not saying your girlfriend’s got a big fat ass. It’s not the point here. The goal is to get you to think differently If you’re struggling. Sometimes you can’t see the fire when you’re standing right on top of it. And that’s the goal here, is to help people in a way that I couldn’t get the help when I was starting out. They were unwilling to. They didn’t want to give me the time of day.
So if you’re struggling again, you have to start doing different behavior. That’s really the point of the story this week is focus your on intentions on what it is that you really, really want, and then understand the nature of the instruments that you’re trying to trade and the cyclicality of commodities and the secularity of equities that at least put you in the right neighborhood to find the names that are working. They might not be names that you hear on tv. They might not even have a big following on Twitter or X now or StockTwits, because when you can find those gems, and that comes straight out of Bruce Kaner in the first market Wizards, when you can get ahead of the curve and find something where the fundamentals and the technicals line up and you could be one of the first 10 people in line, everybody else has to pay you an admission ticket to get into that game. Again, going back to Monday or Tuesday’s episode, that’s how you can really get into something. Probably what will end up being lower prices. That’s not necessarily intention. Then everyone else has to buy that thing before they catch on. Then it gets caught up in the media. Maybe it becomes a media darling. That’s how you can buy a stock at 20 and have it end up being 80, right? So appreciate everyone’s comments and feedback. Appreciate y’all being here. I hope you all have a great weekend. I’ll see you on Monday.
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