If you’ve been around in this business long enough, I can almost guarantee that you’ve heard the saying, “The trend is your friend.” This is undoubtedly true, but I’ve taken the liberty to add a second-part to it, which goes like this, “The trend is your friend, until the trend ends.” Sounds great, right? It even rhymes nicely, but does it have any practical implications for you? Absolutely.
You see, markets move like the seasons, and as it turns out, we are actually able to observe which season the market is in.
After all, you wouldn’t want to be planting seeds in winter, or trying to harvest in early-spring, so why would you buy a stock in a downtrend unless you knew that the season was about to change? I’ve been fortunate enough to be pretty connected to the land for most of my life. I’ve grown all sorts of crops with various techniques, similar to how I’ve tried various strategies when it comes to investing and trading over the years.
Principles are important to me, and I truly believe that every season serves its purpose.
So, when I’m able to apply natural principles over to financial markets, it only fortifies what I already believe. Of course, I’ll never pretend like I know everything there is to know about the markets. After all, I’m only human, and I would argue that this imperfection is part of what gives me an edge. Nature, like the market, will correct itself through time - there it is again - time. Can time be measured in markets? Yes, it can.
In fact, time is one of the reasons why I told traders to get long precious metal mining stocks like AngloGold Ashanti (Ticker: AU) and Agnico Eagle Mines (Ticker: AEM) on February 23, and then subsequently issued a “back up the truck” pyramid long buying program on those names on March 1. It’s the same reason why I also said to buy Google (Ticker: GOOGL) on March 7 - time and price had squared - and the stock surged to new all-time highs just a few weeks later.
So, this begs the question: Is time more important than price?
I’m not certain that I would go that far. We don’t trade time explicitly, but after all, even options and futures contracts have a time component to them. My thinking is that it would be irrational to ignore time completely as a factor when it comes to market speculation.
I live here in Michigan, and spring time is fully underway. I made sure to prune my fruit trees and vines weeks ago, and I’ve started to prepare my soil to plant my first crops of the year. When it comes to stock markets, I would venture to say that we’re in autumn right now. Can planting be done in the fall? Absolutely, but not everything will survive the winter. The same principle holds true for your portfolio.
In previous weeks, I’ve talked a lot about the bond market and what it could mean for your portfolio. As inflation is seemingly on the precipice of making a comeback, it’s important to understand that bonds, as an asset class, are going through winter right now. It’s all about surviving at this point.