It is not the Critic Who Counts
Typically, I wouldn’t post a book review or summary of a book focused squarely on investing especially when it comes to technical analysis. Most of you simply would not care and if you are likely utilizing someone to manage your assets for you, that should be your manager’s job to understand if they are using technical analysis in their investment process.
However, I was able to glean from Point and Figure Charting: The Essential Application for Forecasting and Tracking Market Prices by Tom Dorsey a few life lessons worth mentioning and a couple of investing points that likely apply to most people.
Life Lessons (bullet points are directly from Mr. Dorsey’s book)
- The problem is not that we have too much information. The problem is managing and processing this information. It is like a fire hose of information that hits us in the face every day. The question is how to control that massive information flow and break it down into understandable bits that we can use to make effective decisions.
- To reach the top, athletes—or anyone else for that matter—have to know how to live on the edge. They have to enjoy the elements of risk and a little danger. What I'm talking about is intelligent, calculated risk-taking in which the risk in question has a legitimate cost-reward relationship.
- If you're not willing to risk, you have no growth, no change, and no freedom. And when that happens, you are no longer involved in living; for all practical purposes, you have no life. You're dead, but you just don't know it. So risk, for goodness' sake. Be a part of life. You have the power to be or do anything you want. You can produce miracles if you have a mind to. You have the magic; you just have to tap into it. Get in touch with it, make things happen, live—journey to the stars, push on to new galaxies. If you don't, you will never know your greatness!
There is a sequence of events you should follow before you make a stock commitment
- Evaluate the overall market
- Evaluate the sector you are investing in
- Answer the question of “what to buy” (the fundamentals)
- Answer the question of “when to buy” (the technicals)
- Sectors move in and out of season just like produce in the store. You have to accept “what is” in the markets. Never have any preconceived ideas. You might find one day that watermelons come into season in January. Don't eschew it—it is what is. Keep your eyes open.
- Emotional attachment to a stock because of its name or any other reason, can be detrimental to the overall portfolio's health, and ultimately can be a big drag on performance. When a security moves into a laggard, underperforming position, you need to unemotionally detach yourself from it; sell it to make room for the leaders.
Finally, Mr. Dorsey referenced a familiar Teddy Roosevelt quote from his speech “Citizenship in a Republic” delivered at the Sorbonne, in Paris, France, on April 23, 1910. I thought that it was an appropriate focal point as we here in the U.S. go to the polls this week to elect our leaders who I hope will help lead our country to continued great achievements.
- It is not the critic who counts, not the man who points out how the strong man stumbles or where the doer of deeds could have done them better. The credit belongs to the man who is actually in the arena, whose face is marred by dust and sweat and blood, who strives valiantly, who errs and comes up short again and again because there is no effort without error and shortcomings, who knows the great devotion, who spends himself in a worthy cause, who at the best knows in the end the high achievement of triumph and who at worst, if he fails while daring greatly, knows his place shall never be with those timid and cold souls who know neither victory nor defeat.
And along the lines of the Presidential election, Tom Lee of Fundstrat, put together this interesting scenario analysis of how the S&P 500 could perform depending upon the election outcome. Whatever the outcome of the election, it should make for a very interesting end to 2016.