It’s early December and the days are getting really short. Our native ancestors called this time of year The Season of Dreams: the time of thinking and remembering. In the stock market, we can turn thinking and remembering into money. For this reason, in my book, Beyond the Bull, I encourage investors to be objective in their thinking and objective in their remembrance.
Critics would say, “That’s crazy: we remember what we remember. There’s no ‘objective remembering’ or ‘subjective remembering.’ There’s only remembering and forgetting.”
This is not true. The human brain is not wired that way. We are creatures who seek pleasure and avoid pain. I suggest that your memory is like this. Sometimes we forget those painful times.
Do you remember what the stock market was doing in early December 2008, one year ago? Investors were afraid to open their monthly account statements. There was blood in the financial streets. People’s retirement plans needed to be re-written.
We’d rather remember that, one year ago in December ‘08, the S&P 500 index was around 900 and now it’s around 1100. We’d rather forget that two years ago, in December ‘07 it was around 1500. And we definitely want to forget that ten years ago it was around 1500 in the year 2000.
The days are getting shorter and shorter for those who would have us buy and hold for the long term. It’s just not working any more.
For guidance in this area, I recommend some simple philosophy from country singer Kenny Rogers. In his song, The Gambler, Kenny received the following advice from an old man on a train:
"If you're gonna play the game, boy, ya gotta learn to play it right.
You got to know when to hold 'em, know when to fold 'em,
Know when to walk away and know when to run.
You never count your money when you're sittin' at the table.
There'll be time enough for countin' when the dealin's done.
Ev'ry gambler knows that the secret to survivin'
Is knowin' what to throw away and knowing what to keep.
'Cause ev'ry hand's a winner and ev'ry hand's a loser,
And the best that you can hope for is to die in your sleep."
The problem with today’s investors is they don’t know when to fold ‘em. They think they should always hold ‘em.
Further advice on this topic comes from folk singer Bob Dylan, who sang: “The Times, they are a-changin’.” It appears that the times have changed: buying and holding no longer works. Now we have to know when to fold ‘em too.
As you ponder your dreams in the next few weeks, remember. Your financial dreams are woven in this world of harsh reality: in this world of survival of the fittest. If your dreams of easy wealth in your retirement have vanished, remember that. Remember it objectively. For, when the Season of Dreams ends, it will be time to wake up.
There is real risk in the stock market. It requires offence and defence. It’s not a cake-walk to riches: “You got to know when to hold 'em, know when to fold 'em.”
Ken Norquay, CMT
Chief Market Strategist and Partner
“Buy, hold and know when to sell.”
Links to Beyond the Bull: