Time and Money: You Can Never Have Enough

There is only one way to never be wrong: hold on until you win.

But remember, the market is never wrong.

Physical goods like commodities have finite supply. Though emotion and greed drive prices in the short term, supply and demand will eventually determine value.

An old trading axiom “Cure for high prices are higher prices” has an equal corollary that may be more appropriate in these times.

First off, remember back to $100 Oil and the investment in exploration. New technologies were developed to extract black gold in ways that were not cost effective at lower prices.

Oil sands, horizontal drilling, and fracking unlocked a bounty of oil that had never been accessible before. Companies spent billions of dollars on oil projects on promises of high returns on triple digit oil.

Eventually, these activities created a supply glut which hammered prices. Supply and demand are powerful forces that eventually win every time.

At the time, it was obvious that cutbacks in production would eventually reduce supply and support prices someday in the future. The exploration to production cycle in mining metals or drilling for oil takes years at minimum. A canceled venture or closing of a well will show up later when the supply equilibrium again gets out of whack.

High or Low markets will go…eventually, Supply and Demand determine price.

The amount of time it takes to find that balance can bankrupt stubborn investors. The market is never wrong – maybe incorrectly priced in some eyes – but that fight is hard to win.

The greatest investor in history Warren Buffett has the luxury of having enough money and enough time to be right… do you?

Keep it In the Money,

Alan Knuckman

Alan Knuckman
Editor, In-The-Money

Chart of the Day: Work from Home’s last stand?

Greg Guenthner

When we last check in with the “work from home” trade in late October, this group of 2020 standouts was once again bumping into support near its highs.

Even Mad Money host Jim Cramer was perplexed with the work-from-home pump, claiming it was “wacko” for speculators to chase the stocks at those inflated levels.

But it was difficult to ignore the momentum. Even though many of these stocks were (and still are) “expensive” – they continue to churn higher.

But not without encountering some bumps along the way. For starters, a deluge of positive vaccine news in November took a bite out of many of these stocks, leading to another sharp pullback in the Direxion Work From Home ETF (NYSE:WFH).

But this retreat didn’t last long. Once again, these stocks are flirting with breakout levels:

WFH

We’ll need to see if sector leaders such as Peloton Interactive Inc. (NASDAQ:PTON) and Zoom Video Communications (NASDAQ:ZM) can power this group through resistance. If they can make a serious push, we could see new all-time highs before the end of the year…

Trading Tip of the Day

Don’t outsmart yourself!

We’re beginning to see more analyst upgrades as earnings seasons wraps up and the end of the year approaches. The so-called professionals are out with countless new company reports, raising price targets and predicting more gains ahead for some of Wall Street’s strongest performers.

The only trouble is these were the same folks who were downgrading companies left and right just a few of months ago. If you were following the underweight, equal weight, and overweight guidance, your portfolio has probably sunk underwater.

Trash the analyst reports and ratings. Most of them are nothing but contrarian indicators (if not totally useless for trading purposes). More information isn’t the answer – better information is what you should seek out when performing your market research.

— Greg Guenthner

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Alan Knuckman

Alan hails from the home of options trading in Chicago, where he began working as a clerk on the floor of the Chicago Board of Trade (CBOT). Beginning with his days on the floor, Alan’s worked with all aspects of the options markets for the past 25+ years.

Transitioning from a clerk to a floor...

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