Most people lose money in the stock market, but a few — like Warren Buffett — get super rich.
Why? Because they read. They also always invest with the market trend. This is not easy. But to borrow a phrase from Tom Hanks from a popular movie, “If it was easy, everyone would do it.”
Market trends are like the seasons; they come and go. Most of the time, trends last two to four years; some last much longer. But you need to know if you are in an up or down market. This is a changing phenomenon, so you have to read trusted market letters to become familiar with the current trend.
But even knowing and understanding the trend is no guarantee. Buffett’s Berkshire Hathaway Inc. lost 62 percent of its value in 2008. No one is immune to the potential for losses in the market.
Another secret to successful investing is to go contrary to the crowd. You should always note the way the crowd is going and go in the opposite direction. If you’re thinking of investing in something that a lot of people are excited about, don’t do it. Other people’s excitement is an excellent indicator that it’s too late.
Whipping people into a frenzy is a way to sell magazines, news broadcasts and cable shows. And after a while, the people pitching it start to believe their own hype.
The clearest example is the current fiscal cliff drama. Will it be a downward trend? No, it will be more Kabuki Theater. When the nation grinds to a halt, everyone looks to Washington, the place where all these grandstanders and snake oil salesmen dwell… just as they and their media lapdogs want us to.
Automatic spending cuts can be very ugly if no government spending plan is agreed to. But who wants that? No one does — especially not the elected class. No politician would allow anything to kill their chances for re-election. So Wail Street and the congressweasels will always find a way to spend more of your money.
We will survive the “fiscal cliff.” The can will get kicked down the road. And in terms of investing, the last time there was a debt ceiling fight, the market rose almost every day. Plus, good businesses will find ways to succeed whether times are bad or good. That’s why we invest in them in times like these.
However it’s important to remember that even though a stock or stock sector may be in a u-trend, stocks or market sectors never go straight up.
In fact, about 80 percent of the time, up-trend stocks are just sitting or even correcting down against the trend. But, if the trend is up, they will always rise to new highs until the top when they reverse to a new down-trend and prices start falling as the smart money sells.
You should be out of this sector at this point. Know the trend, because the trend is your friend.
For example a rally could be fueled by the huge amount of fiat currency thrown into play by the Federal Reserve and Biden’s “woke-frastructure” plan should it pass.
If you pick the right equities, you can make money in even the most bearish of markets.
A word of caution: Don’t get in too deep. And don’t forget to keep stop losses on your holdings.
Stop losses, which put an automatic sell on your equities when they drop to a certain price, can save you from disaster when a rally is over. Just stay on top of your holdings and ease those stop-losses up as the stock prices rise.
Typically, the public invests at the top when everyone is in a frenzy about a stock or investment. This is the time for you to get out because the profits are gone and the stock or the market is at its top and ready to go down.
For the greatest profits, buy quality stocks when they are out of favor. The yield should be high and the price low. These are important concepts, but they will all come together fast for you if you read these and other informative letters.
And one additional word of warning: Don’t feel guilty for making money because investing is not a zero sum game. Other people don’t necessarily lose money because you are making it. A rising tide lifts all boats. “Income inequality” is hokum, and merely the latest code word circulating in the Washington, D.C. cesspool.
Income inequality is altruistic doublethink. It is designed by the elites who love to use class warfare and envy to distract the masses from the truth of the economic malaise they have created through profligate spending.
Bob Livingston
