How much negativity can the average investor take?
And, more important, can they turn it into good news?
The gains they made over the summer are gone. The S&P is down by double digits from its peak in September.
The market quakes every time the Federal Reserve gestures in the direction of another rate hike.
But with U.S. inflation still running rampant – practically the worst in 40 years – rates are sure to go up… and up… and up. (It’s cold comfort, but it might make you feel just a bit better to read about the situation here in the U.K. where I live.)
As a hedge fund manager, dealmaker and frequent interview subject, I’m asked daily what the smartest move is right now for normal (i.e., non-multimillionaire) investors.
Should they stay the course? Move into more speculative assets? Take their money off the table entirely?
To answer the question, it’s helpful to look back to the last time investor confidence was so severely rattled…
Way before the “Corona Crash”… and just before I made some of the quickest money of my career.
A Critical Moment
In 2008 I was focusing all my attention on my hedge fund, Praefinium Partners. We were massively successful (and still are), having been called “one of the world’s best-performing hedge funds” by The Economic Times.
But there were dark times ahead, as you know.
The global economy was in for a shock as the housing industry collapsed, knocking other key sectors down like dominoes.
Suddenly, the brokerage we’d been using to clear multimillion-dollar trades, Bear Stearns, went under.
Lehman Brothers, Fannie Mae, Freddie Mac and others soon followed.
It sent shockwaves through the markets. And just as they are today, everyday investors panicked. They wondered whether it might be time to bail out of the market for good. (Anyone who’s seen a stock chart from the 2008 crisis to now knows just how poor a decision that would’ve been.)
It was a critical moment for me, my partners and our clients… not to mention the business we’d worked so hard to build.
What we did next would change everything.
A Legendary Tool
I want to be clear that, no, we did not simply “stay the course.”
This isn’t one of those stories where the moral is to simply stay invested, mind your stops and hold on for dear life.
I certainly wouldn’t have gotten to where I am today peddling that sort of basic advice.
And besides, my Praefinium partners and I didn’t simply want to sustain… we wanted to grow our clients’ wealth considerably.
With some hard work and unique thinking, we did exactly that.
We revamped our entire strategy, placing emphasis on a powerful indicator that too few investors are familiar with.
To be honest, I’ve never heard anyone outside of the money management world mention it. And I first heard about it at a private meeting with the heads of Goldman Sachs.
There’s a good reason this indicator is legendary among the boardroom crowd: It goes FAR beyond traditional metrics. Like Roger Bannister running the first four-minute mile… this is the indicator all the hotshots try to beat.
Smoke and Mirrors
Now, when I say “traditional metrics,” I’m talking about the fundamental data investors get from earnings reports. Everyone uses it. Everyone is taught to use it. And yet this data, frankly, almost never gives an accurate view of what’s happening within a business.
You know it’s true. Just think about the kinds of tricks companies have up their sleeves.
They can use depreciation… one-time events… and a bevy of other accounting tricks to paint a rosy picture for shareholders.
It isn’t even difficult to do. And it’s why there’s so much confusion around earnings.
You’ll get companies that increase profits tremendously… yet the stock goes down. Or you’ll see a company with a massive loss… yet the stock goes up.
Investors leaning on traditional metrics – that’s MOST retail investors, mind you – are the ones who suffer most in those moments. And it’s because they don’t have a truly accurate view of what is going on inside the business.
The indicator my firm uses – which I’ve made a central part of my own strategy for more than a decade – cuts to the heart of things.
It’s like an X-ray.
And unlike many of my peers in the industry, I’m happy to share it with you. Go here and I’ll walk you through it.
But before you click, let’s get back to our success during that last big downturn.
This is critical…
From the time my team first deployed it – at the height of the 2008 crisis – this indicator has helped turn every $1,000,000 invested into $5,920,000.
In difficult times like these, it’s the No. 1 tool I trust to point me and my followers toward the best opportunities.