'Do Nothing' Is Usually The Best Answer
Most of us in the trading and investing universe have the freedom to buy or sell anything we want, whenever we want. Sure, there are some exceptions out there like long-only mutual fund managers that have to pretty much be fully allocated at all times or certain funds out there that have to follow a specific mandate. The majority of us, however, can do anything we want, even if it’s nothing at all.
How often do you hear someone on the TV or read in an article that the guru opining on the topic is suggesting that “doing nothing”, is the best course of action. It’s either a buy or a sell, otherwise the publisher, or producer, won’t use that particular guru in the article or segment. “Doing nothing” doesn’t sell. It’s hard to make up a headline around, “He says to do nothing with XYZ”. I can’t tell you how many times I get a call from a media outlet and they don’t use my quotes because it isn’t sexy enough. If I say, “I wouldn’t do anything with it here”, that won’t make it on. I promise.
There is a big difference between those of us who are here to try and make money in the market, or keep what we have for that matter, and there are others who simply don’t have any interest in it, preferring to write about it or criticize those who do instead. They are two completely different lines of business with completely different objectives.
I look through thousands of charts a week. Anyone who knows me can tell you that. On the blog or through our research company, I only discuss a handful of setups that I think are worth watching. Over 95% of the assets I look at are a “no touch”. These include stocks, indexes, commodities, currencies, etc. There are very few actionable situations in this world at any given time. I’m not afraid to tell you that I wouldn’t touch something.
Always having conviction can be dangerous. Sure, the TV producers want you excited and bringing energy at all times. I get that. But you didn’t see Ted Williams going out there swinging at every pitch did you? He’s not one of the greatest hitters in baseball history because he had conviction on every pitch. No, he waited patiently for the one that was right for him. I like to approach the market in the same way: with a large degree of patience.
See, the beauty about patience in this market is that there will always be another pitch. If we miss a stock that “we should have bought”, I promise you, there will be another one. Maybe not tomorrow or the next day, but one will come. If you do the homework and open your universe to enough asset classes and opportunities, the perfect pitch will come, and they will keep coming again and again.
It’s not quite that simple in the venture capital world, for example. If you miss a big one that your competitors get, that’s a fail. The difference is that there are a finite amount of opportunities in the private world. In our liquid space, however, we have the advantage there there are endless opportunities to make money, on both the long and the short side, in the U.S. and elsewhere, equities and futures….
Start counting how many times you hear your favorite gurus talk about how they wouldn’t do anything, when asked about a specific stock or asset class. I’ve been doing this stuff for years, I know how the sausage is made. If the answer is, “I’d do nothing”, the segment gets scratched or they turn to another guest. That’s their business. But in the real world, “Doing nothing”, is usually the best answer. It’s actually very rare that, “Doing something”, whether it is a buy or a short, is the best course of action. Think about that.
Every now and then I like to talk about a specific topic that I think a lot about. It helps to put my thoughts into words. It’s therapeutic for me and can potentially help readers think about stuff like this or start conversations out there about how to make our community better. We’re all in this together.
Patience. That’s something we all need more of, myself induced. Here’s to a great year of maintaining patience and rarely having too much conviction. The pitches will come, I promise. Our job is to keep enough capital on the sidelines to be able to take advantage of them when they do.
This was originally shared on All Star Charts
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