The Slap on the Side of the Head
Stock Market Video
This Week’s Fortune Cookie
In Case You Missed It
In this week’s Stock Market Video, Mike Cintolo talks about his impression that there is just not a lot of money to be made in this environment. Even the “best” sectors and indexes are generally chopping sideways, so it’s best to play things lightly until that changes. Even so, he says he’s not having trouble finding names to add to his watch list, mentioning a bunch of stocks that are many weeks into new launching pads and have been resisting the market’s sloppy action.
The Slap on the Side of the Head
As I’ve written before, the market keeps me humble. When I’m feeling like I’ve pretty much got things figured out (in late February, say) the market has been more than willing to take a little time out of its busy schedule to deliver a quick slap to the side of my head. I understand; it’s nothing personal. I sell a few stocks, letting the market know that I’ve received the message. And now all I have to do is build a new watch list while I wait for the lump on the side of my head to heal.
Like I said, the market and I get along fine.
But I know that there are investors out there who aren’t getting along fine.
Every time I look at the chart showing the recent performance of the PowerShares Golden Dragon Halter USX China ETF (PGJ), it hits me again.
The Golden Dragon is an ETF that represents all Chinese stocks that trade on U.S. exchanges as ADRs (American Depositary Receipts). I use it in Cabot China & Emerging Markets Report to gauge how investors are feeling about my investment universe. The green line is the 25-day moving average and the red line is the 50-day moving average. When the Golden Dragon is below its moving averages, the trend is down and I advise a more defensive stance. Here’s a three month chart that shows the peak in early March and the way PGJ has been bouncing downhill ever since.
What you see following the peak on March 7 is a visual representation of the slap the market was kind enough to deliver to the side of my head. It’s been a serious one, now in its 10th week, and it has pushed me to reduce the stock exposure of the Cabot China & Emerging Markets Report’s portfolio to just 40%.
But I know that there are investors out there who haven’t been willing to listen to what the market is saying. They feel the slap, but they don’t get the message. They just sit, watching their losses increase and wishing they knew what to do.
I talked to a financial advisor the other day who told me what he liked most about Cabot’s growth advisories. I liked the phrase he used and I want to share it with you.
Participate and Protect
He said “you allow investors to participate and protect.” He was talking about the market timing disciplines like the Cabot Emerging Markets Timer that give us explicit signals about when to start reducing our exposure to the market and going to cash. Not to belabor the point, but the “protect” part is the discipline that signals us to get out of stocks and into cash.
I know it sounds like the motto on the door of a police cruiser (“Cabot Market Police: We Participate and Protect.”), but it’s just the simple truth. Staying dry when it rains is every bit as important as making hay while the sun shines. So open up your umbrella if you’re still standing out in the rain.
On a completely different subject, I want to give you a heads up about the second Cabot Investment Conference that will be held here in Salem in August. It’s an event that brings all of Cabot’s analysts together to talk about how they see the markets doing, how they are positioning their portfolios, their best tips and techniques about how to invest in growth stocks, value stocks, income stocks, small-caps and options.
It’s a full couple of days with group presentations, breakout sessions with individual analysts and panel discussions of top picks. And it will give you a chance to talk with the Cabot analysts of your choice at length. (I remember a bourbon-fuelled discussion in the bar of the Hawthorne Hotel that went well into the night.)
Salem, Massachusetts, in August is a fascinating place to visit, and our planners have made arrangements for trolley tours and harbor cruises to supplement the investment talk. I hope you’ll consider attending. It’s the equivalent of a boot camp for investors, but with great food, comfortable accommodations and scenic surroundings.
The Early Bird Special rate will be expiring soon, so book now and save money.
I hope to see you there.
Here’s this week’s Fortune Cookie.
Tim’s Comment: Trees, stocks, it’s all the same. The sooner you start, the greater your reward.
Paul’s Comment: Tim decided to go all Clint Eastwood on this one, so I’m going to write a little more. I often talk to investors who are discouraged that a stock they intended to buy has popped higher before they could hit the “BUY” button. And I always try to comfort these poor souls by telling them that as soon as I find a way to buy a stock yesterday, I will let them know. Stocks will force hard choices on you, including the decision on whether to buy at a higher price than you’d like and whether to sell after absorbing a bigger loss than you’re comfortable with. But making decisions is the essence of investing, and if you think about it, every day you don’t buy (or sell) is a decision not to do anything. And every decision is one you make today, just like in the Chinese proverb.
In case you didn’t get a chance to read all the issues of Cabot Wealth Advisory this week and want to catch up on any investing and stock tips you might have missed, there are links below to each issue.
Cabot Stock of the Month chief Tim Lutts writes in this issue about how hard it is to recognize successful CEOs before they become legends. Tim also begins his new series on 10 Stocks to Buy & Hold Forever. Stock discussed: Zoe’s Kitchen (ZOES).
Cabot Wealth Advisory 5/13/15 – The Inspiring Story of Grace Groner
In this issue, I write about the most amazing buy-and-hold stock story you’ve ever heard, a woman who held one stock for 75 years! Stock discussed: Mindray Medical (MR).
Roy Ward, Chief Analyst of Cabot Benjamin Graham Value Investor, writes in this issue about the difficult business of knowing when to sell. He cites research that shows how holding stocks for longer periods can lead to bigger gains.
Have a great weekend,
Chief Analyst, Cabot China & Emerging Markets Report
Editor of Cabot Wealth Advisory