Stock Market Video
The Wisdom of Not Asking "Why?"
Character is Destiny
In Case You Missed It
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In this week's Stock Market Video, I look at the varying
fortunes of different parts of the market. U.S. stocks are in a
confirmed downtrend, but emerging market stocks are hanging in a
trading range. It's a good time for caution, and the defensive
action you take now will save your principal, allowing you to
make more money when the inevitable recovery arrives. Stocks
discussed include:
Affiliated Managers (
AMG
), America Online (
AOL
), Cabot Oil & Gas (
COG
), Mellanox (
MLNX
)
and
Baidu (
BIDU
)
. Click below to watch the video!
The Wisdom of Not Asking "Why?"
One of the great joys of being a human being (a species with a
brain that's much bigger than it absolutely has to be) is that we
are constantly trying to figure out the "why" of things. We can
spend hours, days and months digging into the causes of wins and
losses in sports and politics, how disasters happened and how we
responded, even the whys and wherefores of celebrity
behavior.
But, as editor Mike Cintolo reminds us in this Thursday's
Cabot Wealth Advisory, asking "why?" in growth investing can
sometimes be hazardous to your economic health. That's because we
sometimes substitute analysis for action, trying for a deeper
understanding of a big move from the market or an individual
stock rather than just taking action and moving on.
When a particular stock falls off the end of the dock, the
most common question Cabot's analysts get is about why the drop
happened. Sometimes we can say (in recent weeks, it's usually
it's a disappointing earnings report), and sometimes we
can't.
But the questions we get from our savvier subscribers have to
do with the nuts-and-bolts questions of what to do now. Should
the stock be sold? Is the dip a buying opportunity? Are the
market timing indicators positive or negative?
In the same way that a sea captain in the age of sail wouldn't
spend a lot of time pondering the vagaries of meteorology in the
middle of a storm, veteran growth investors know that the
important information is limited to what you can act on. Which
way is the wind blowing? Where are the reefs and the coastline?
What shape is the ship in? The other questions can wait until
you're sitting by the fire in your living room.
So don't let yourself be trapped by the "why" behind the
movement of stocks. And right now, with the market in a very
touchy state, don't worry too much about who's doing the selling
or even when it might end. The more you stick to the basics-buy,
sell or hold-the better off you're likely to be when markets find
their footing and start advancing again.
And that's when asking "why?" makes sense.
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Here's this week's Contrary Opinion Button. Remember, you can
always view all of the buttons by
clicking here.
Character is Destiny
Tim's Comment:
Attributed to the Greek philosopher Heraclitus. Maybe your mother
taught you this … or maybe your priest, minister, rabbi, etc.
Character refers to those moral qualities, ethical standards and
principles that "ideally" guide our decisions. Most of us have
room for improvement.
Paul's Comment:
I've also heard social scientists say that "Demography is
destiny." That's very natural for people who want to understand
collective behavior. But Heraclitus hits the nail on the head for
the actions of individuals. In the long run, it's our human
differences, our "character," that makes legends of some people
and cautionary tales of others.
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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 Wealth Advisory 11/5/12 - How to Become
an Instant Stock Expert
I used this issue to talk about the intense research that
leads to buying a growth stock and how you should let that
research go once you have made the buy (obsess before the trade,
not after!). Stock discussed:
HDFC Bank (HDB).
Cabot Wealth Advisory 11/6/12 - A Look at Two
Chinese Quarterly Reports
In this issue, I wrote about going through the household of
departed loved ones, what to do with the stuff left behind, and
how life goes on after a death … or an election. Stocks
discussed:
Mindray Medical (MR)
and
Nam Tai Electronics (NTE)
.
Cabot Wealth Advisory 11/8/12 - The Stock is
Not the Company
Mike Cintolo, editor of
Cabot Market Letter
, looks at the disconnect between companies and their stocks and
the role that investor perception plays. Stock discussed:
Oasis Petroleum (OAS)
.
Have a great weekend,
Paul Goodwin
Editor of
Cabot Wealth Advisory
and
Cabot China & Emerging Markets Report