Market Timing and Discipline

I am not a market timer, I have no idea when the market will turn - it is too difficult to execute market timing strategy on a consistent basis, in my opinion.

Market Timing and Discipline

I am not a market timer, I have no idea when the market will turn – it is too difficult to execute market timing strategy on a consistent basis, in my opinion.  The worst thing that could happen to you is if you end up being right once about a change in market direction.  Why?  Because you’ll think that you figured it out and will lose (or not make) money in the process. My answer to market timing is a strict buy and sell discipline. For every stock in the portfolio I set a buy, hold and sell price (actually I prefer to set P/E targets).

Recently quite a few of my firm’s stocks have been hitting the “sell” range and we have been selling. In the roaring market, emotions guide us into doing the opposite of what we should be doing; they tell us “buy” instead of “sell.”  So I let discipline dictate what I do.

There are very few stocks on my watch list hitting “buy” valuations today.  The group that is becoming increasingly attractive is oil services stocks, however.  In fact, my firm took a position in BJ Services Company (NYSE BJS) last week and we’re looking to add more oil services names to the portfolio. We are buying these stocks because they are hitting our valuation targets, not because our emotions are telling us to do so.

Please read the following important disclosure here.

New to investing?

Explore these valuable guides to get started.

Related Articles

Your Sophist Filter On CEOs, Cynics, and the Voice in Your Head

Your Sophist Filter: On CEOs, Cynics, and the Voice in Your Head

A great speaker can bend logic with emotions and exert undue influence on your decision making. The better someone speaks, the more discriminating your Sophist filter needs to be.
Depressing Reasons Why I Am Bullish On Gold

Depressing Reasons Why I Am Bullish On Gold (part 2)

Here is what changed my mind. Not something about gold, but many things about the dollar. The US dollar is the world's reserve currency. It has had a well-deserved place since WWII, and that rested on three things: the largest, steadiest, most diverse economy; a politically stable democracy; the best military.
Narrative Change

Narrative Change (part 1)

Narrative change is a reversal of mass behavior. Economics and stock market valuation are governed by soft laws, but the reality bent by human behavior can disagree with these soft laws for much longer than rational actors would expect, or stay solvent. The change, going from euphoria to despair, is a change in narrative.
Todays Market = 1999 Capex + 2008 Credit

Today’s Market = 1999 Capex + 2008 Credit

I wrote in the past that the AI rollout feels a lot like déjà vu of the 1999 telecom bubble. Today's AI bubble has elements of both the 1999 overinvestment in internet infrastructure and the 2008 collapse of financial instruments that infected the banking and financial system.

Leave a Comment