THE NEED FOR SIMPLICITY THAT WALL STREET WILL NEVER EMBRACE
Within the context of a bull market that voraciously searches for reasons to tack on points to the upside, the default stance of an astute investor should be that of simplicity. Attempting to dissect and digest an abundance of information will do little to justify the persistence of such a market. It only serves to cloud the reasoning of an investor. It is true that often times investors suffer from paralysis through analysis. Information is good to a certain extent. Within the investment community there are very few that escape being information gluttons.
It stands to reason then that it is best to keep analysis extraordinarily simple. The greater the extent of the bull, the more simple one must keep their analysis in order to avoid being paralyzed through thought. This market is at a point where the more elementary the analysis, the higher percentage your success rate will be.
This phenomenon of simplicity being the modus operandi of true bull markets is the reason you see so many newcomers do extraordinarily well during extended bull runs. Their approach is extraordinarily simple, falling right in the sweet spot of analysis that creates the greatest profit during these types of runs. I am not speaking about longevity here. It is true that those who create extraordinary gains during true bull runs will end up falling flat over the long-term. I am not arguing that point. My sole concern is creating the proper mindset for investors to perform in the here and now. We'll deal with tomorrow...tomorrow.
Let's look at two charts that exhibit simplicity to the Nth degree. Without giving much thought in terms of dissecting these price moves, simply look at the essence of what is happening. Allow your eyes to do the work without any "buts" or "ifs" involved.
The first chart is the Nasdaq Composite, which was most recently reviewed in the weekly review on Sunday. Here is the outlook after today's move:
NASDAQ COMPOSITE
Next we have the S&P 500, which is putting together picture perfect movement ABOVE its generational trajectory. This is as bullish an intermediate to long-term pattern as can be imagined:
S&P 500
You know why Wall Street is filled with underperforming asset managers that have destroyed public perception of aptitude within the industry? The very pedigree that defines the modern day Wall Street employee is the biggest impediment to success. The pedigree that defines asset management in the 21st century is built on analysis to the point of exhaustion. If you are not analyzing a stock, commodity or economy on an hour by hour, minute by minute basis then you are not properly fulfilling your duties. Or so they are told.
Thus begins the extraordinarily difficult path of the modern day Wall Street neophyte who is led down a path of extraordinary effort in an arena that requires aptitude through the discipline to do less. Looking at your screen in an effort to dig out every piece of information will eventually lead towards incorrect decision making. Staring at flickering red and green numbers constantly throughout the day is not productive nor profitable. If it were then every hedge fund manager with 8 screens surrounding him would be extraordinarily and consistently profitable. I can promise you that there is a negative correlation between the number of screens an investor has and their ability to sustain profitability over the long-term.
Keep it simple. Cut down on your information flow. Look at the markets through a filter of information that is lacking, as opposed to information that is abundant and infinite. Your portfolio will thank you.
