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So, You Wanna Make a MILlion?


Expect nothing. Do something.

I owe Minyans an apology. I was out of range for posts yesterday with the fade trade of the year sitting on my screen overnight. I got the first email about the stock market EVER from my mother-in-law on Wednesday afternoon. To put it mildly….well….there were no questions about her grandchildren.

I'm not sure this sentiment indicator isn't more valuable than the last tip I got from a very sharp Wall Streeter who told me Microsoft (MSFT) is a must own and the best idea he's got, by far. I must disagree, there are no musts. I think waiting, assuming and expecting past successes to repeat is precisely what may doom many U.S. investors. Our firm constructed a Complacency Index to help us avoid the worst of these assumptions, in our judgment. I believe extrapolating what we've seen work is the biggest blind-spot for professional money managers, even more so than for amateurs.

Explaining the market's moves the past few weeks with anybody's name, blame, or inflation stat, I believe is just plain silly. We are in a market that was perfectly predicted by our own fearful leader when he started this site. To quote, "We are in a daily battle of bulls and bears, with the resulting grist dripping on tomorrow's front pages." This approach is very similar to our own, and how my partner and I have begun every single day of our careers. We may cook the grist in an entirely different way than Toddo, and others who I respect and learn from greatly. An open-mind (and inbox) is the key. What I think we share in common is that "Hoping" is not a page in either of our playbooks.

Speaking of which, our shared outlook may best be captured by another big fish, Bill Parcells, who said "Expect nothing. Do something." I don't think better advice could be given for the next several years in this market. I think about that quote every time I read who is to blame for a market's move. That, and ole Amarillo Slim who said, "Shut up, or bet on it." I think Slim would outperform most managers right now because of his ability to play the players, not the game. He didn't need good cards. Emotions may be a pronounced portion of our game now also, in a market that is frustrating many players into making poor decisions. The frustrations may have only just begun; chips are no longer falling from the sky you may have heard. You are going to have to take other players' chips.

We wrote to our partners a few years ago why our entire portfolio and thought process expects "the market" called the Dow Jones Industrial Average (which many incorrectly tie their emotions to), may be going exactly nowhere for 15 years based on our work showing that each of four secular tailwinds became headwinds. Don't look now but we're half-way there. With no wind at its back, the Dow is right where it was seven years ago. Could we be wrong? Absolutely. We attack our ideas every day with the ultimate tool in all of money management at our side, the willingness to change our positions.

On the surface, my new mother-in-law (MIL) indicator may sound silly and will more likely get me in trouble. But…I'm not sure that swings in emotions around a confusing market aren't behind more of the recent moves than some of Wall Street's best explanations.

We are having breakfast on Sunday with the MIL, I'll be listening more carefully than ever. And, happy Father's Day to all dads. Remember to thank your in-laws who brought us our spouses, our greatest top-ticks of all. Give 'em a hug, and a listen. Then e-mail me with the input for the MIL!
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