Since time immemorial, investors have always sought an “information edge” to boost their returns.
For example, legendary investor Nathan Rothschild famously made a killing in the markets in 1815 when he received news before everyone else in London that Napoleon had been defeated at Waterloo.
That sort of thing is impossible today, of course.
The internet is the Great Democratizer when it comes to newsworthy information.
As soon as something important happens, everybody knows it… almost instantly.
You would think this would level the playing field so that everyone earns high returns.
Alas, that is hardly the case.
Instead, a small minority of us are enjoying almost all the big profits.
Because good advice does nothing for people who don’t understand it, won’t believe it or don’t have the courage to act on it.
Today’s market action provides a near-perfect example.
Stocks are surging in response to news that the coronavirus vaccine created by Pfizer (NYSE: PFE) and BioNTech (Nasdaq: BNTX) – one of 63 in development – has proven 90% effective in Phase 3 trials.
You’re probably tempted to throw your mask in the air and yell “Hallelujah!”
It’s great news. But who could have expected it?
Well, anyone who has been reading my columns here for the last six months.
Call me a broken record on the vaccine timeline and I’ll plead guilty.
I was stuck on the subject again in Friday’s column, where I noted that the economy is recovering, joblessness is falling and “a vaccine – which will finally take us back to normal – is only weeks away. Widespread inoculation? A matter of months.”
You’d think readers would be excited and reassured by this prospect. Yet some reacted with anger.
In the comment section, for instance, Becca B. sounded off: “This is absolutely NOT TRUE, and based on completely wrong information. I’m not sure who is feeding you this stuff, but please give your investors a little more credit than this pure idiocy.”
Reader Paddy W. questioned whether it was even possible to create a coronavirus vaccine.
Richard A. said simply, “Take me off your list and do not send me any more emails.”
This is a free e-letter, so anyone is welcome to subscribe. Or unsubscribe. (We’ll miss you, Richard.)
What still amazes me – after a 35-year career as an investment analyst – is how many folks continue to fall for the unrelenting pessimism of the mainstream media.
No… matter… how… many… times… it… doesn’t… pan… out.
At the risk of sounding cynical, this is actually a good thing.
We live in a world where people compete for jobs, promotions, mates and, yes, investment returns.
If the majority of folks out there want to believe we live in a horrible world at a terrible time and “the country is on the wrong track” – as they’ve been telling pollsters for three decades now – it makes it awfully easy for the rest of us to scoop up the opportunities… and the profits.
Paying subscribers – who receive my Oxford Communiqué and VIP Trading Services – have locked in literally dozens of double- and triple-digit gains this year and several hundred over the last decade.
We’re sitting on dozens more today.
This is not because we have an information edge on everyone else.
I offer plenty of opinions here, but the facts I cite are public information.
Our edge is the conviction that human beings, technology and capital markets operate as a comprehensive problem-solving machine.
That’s why – while problems, setbacks and even crises are inevitable – things have a strong tendency to get better, not worse.
All the great investors throughout history – Warren Buffett, Peter Lynch, John Templeton and others – had an optimism about the future that simply didn’t have an off switch.
Compare that with the mindset of the typical punter: nervous, uncertain and fearful of the future.
While we are rational optimists, we still hedge our bets, of course.
We asset allocate outside the stock market, diversify within it and run trailing stops behind most of our individual stock positions.
That gives us unlimited upside potential with strictly limited downside risk.
And today – yet again – we are reaping the rewards.
Note: Comments may have been edited for spelling, grammar and/or clarity.
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