Everyone Is a Genius in a Bull Market

There are 3 ways to make a lot of money in investing over the short term. The first is to be the fastest. The second is to be the best or some kind of genius. The third is to cheat or engage in some form of insider trading.

The case is different for long-term investing though. Over the long term, you need to be humble, disciplined, consistent, and seek value.

Value investing almost guarantees success in the long term. But most people are impatient. The reason they are investing is to make fast money. Hence, they play the short-term game.

I consider myself pretty intelligent when it comes to investing. And even at that, I don't think I can win the short-term game. The agony of the downside risk is enough to give anyone health problems. Why would anyone put themselves through that?

The only way to be the fastest is to have high tech. As someone managing your own portfolio and funds, you do not have the high tech it takes to be the fastest. Banks and hedge funds spend millions of dollars on high-tech just to be the fastest. Trying to compete with them on speed without having the same equipment is futile.

More people cheat more than you think in investing. For example, think of all those elected government officials who certainly get privileged information and are still allowed to trade the stock market. There are myriads of legal cheating going on and people won't admit to it easily.

Those bending the rules to their favour just call themselves geniuses. That is their camouflage. But the game is the game. The people who are geniuses in the short term are either cheaters, or they just got lucky.

So, if it was not cheating (legal or illegal), then it was luck. Let no one deceive you. Luck is the contributing factor. Yes, there was analysis, charts, research, studies, etc. But some did the same and ended up losing money.

In every stock scenario, there are always some winners. And it is more random than you think. Everybody is making guesses in the short term. The accuracy of predictions is only better when stretched out for the long term.

Everybody refers to themselves as a genius when making money. But it turns out that it is easy to make money in a bull market.

You Make Money When You Buy

Selling at a profit is overrated. People often forget that they will pay taxes on their gains. They believe they make money when they sell.

But if you listen to legendary investors, you will observe that they make money when they buy. Legendary investors don't hope to sell at an inflated price. Instead, they buy at a depressed price and hope the asset rises to its fair price.

Your emotions will not guide you right when it comes to investing. It will always lead you astray. You will feel like selling when you should buy more. And you will feel like buying when you should be selling and rebalancing your portfolio.

Inverse emotions often work well. But you cannot time the market turns. Let's take Nvidia as an example.

The company is around $1.7 trillion in valuation. Meanwhile, the revenue of the business is around $30 billion. How is that even possible? There will certainly be some reverse trend to this at some point. But everyone seems to be riding the wave now.

People can smoothly talk their way around Nvidia now. But when the stock price starts reversing into reality, you will see how the narrative will change.

TSMC (Taiwan Semiconductors) has almost 5 times the total assets of Nvidia. Yet, Nvidia has more market cap than TSMC. A simple Google search will reveal all of this to you.

This is one of the reasons I say that the stock market is not a reflection of the real economy. You have to open your eyes well. And don't expect that the market is fair.

You make money when you buy. Not when you sell. You lose money especially when you panic sell.

The Market Turn

I try not to precisely predict when the market will turn. I hope it does sometime in the middle of this year before the US elections so that we can have some lax financial conditions that will bring liquidity back into the real economy.

But the current state of things is growing the wealth inequality. For example, in wealthy neighbourhoods of the US, real estate prices are surging, while it is mostly stagnant in other places. Ultra-luxury brands are having a record year, while those selling to everyday people are struggling.

This will continue until the Fed acknowledges the economic weakness and starts to cut rates. The Fed says they will embark on QT (quantitative tightening) to combat inflation. But I think that's a lie. Yellen would keep the US borrowing heavily.

Easing and stimulus kept the US economy afloat in 2023. And Yellen is set to do the same in 2024. The rest of the world cannot ease like America without debasing their currency drastically (which will have a more severe effect on their economy).

So, when you hear things like "the resilient US consumer" or "the US exceptionalism", it is nothing more than stimulus on the advantage of being the global reserve currency. And there is a tendency for the narrative to break in 2024. But we wait to see.

I think the market will turn when the Fed starts to cut rates. Meanwhile, we continue to watch the commercial real estate space. Interesting to see what will happen in March after the Fed stops their bank lending program (that started about a year ago on the heels of the failure of SVB).

Conclusion

With these few words of mine, I hope I am able to convince you to be a long-term investor. No one can tell with certainty what will happen in the short term. But long-term predictions based on market cycles are often always right.

Don't be in this for a quick buck. Don't be in this for fast cash. Be in this for generational wealth. Think and do your own research.

Stay rich.

P.S. Read the millionaire investing playbook today