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This is not the typical picture of a drawbridge one might conjure up. There are many different kinds.
I was recently in South Florida for some time this Winter to escape the Northern cold and snow. Occasionally I got stopped at the Intracoastal drawbridge that gets raised to allow the large yachts and sailboats to keep moving. I didn’t pay attention to the schedule, and unfortunately, I’d hit it at the wrong time (they go up twice every hour during the day).
It got me thinking about the origins of drawbridges and their initial use. Their origins go back to medieval times. There are many different versions of drawbridges, but the original conception was to build castles with moats around them that would keep assailants and enemies out.
Usually located on hills, these castles had an advantage because they could see in any direction and for many distances. These castles were connected to the other side of the moats by drawbridges which could be pulled up at a moment’s notice.
The castles also created other kinds of defensive drawbridges like the picture above that could seal off the main part of the castle should the enemy further penetrate the other encumbrances.
As we have come to understand, these concoctions were invented with one goal in mind…creating a defensive, protective, and lifesaving mechanism.
We’ve done something similar by developing trading rules, proprietary indicators, and mechanical trading systems that integrate acute risk-averse methodologies. I like to think of it as our ability to help you build your investment drawbridge.
This emanated from our many years of experience trading in the commodity pits in NY. Since we were trading our own accounts (our own $), we had to know, believe, and understand that RISK mattered in dollars and cents. It was self-preservation.
To this day, the mantra holds true. If you can protect your investment dollars from unforeseen enemies, you will preserve capital and have more to work with in the next upcycle. This is why we spend so much time and effort building investment solutions and educating people about the “hidden enemies” of risk and drawdowns.
This concept has been a main construct in all of our investment strategies. Whether looking at Sector Plus (ETFs), investing in highly volatile small-cap, NASDAQ, cryptocurrencies, and even our own Mish’s discretionary service…all employ risk-averse techniques to mitigate the dangers that might be lurking from the market enemies.
This week saw more evidence of having to combat these enemies, which seem to all hit at one time: higher (spiking) interest rates, out of control inflation, rapidly rising food and energy prices, all on the backdrop of a slowing economy, stricter monetary policy, and the expectations of ongoing Fed interest rate hikes.
The result is high volatility, contracting multiples on stocks, a huge sell-off in fixed income securities, and tremendous uncertainty about our capital markets.
More importantly, as recent as this past week, we have seen a high percentage of stocks (and ETFs) incurring selling pressure leaving investors with virtually nowhere to hide but cash.
Our own Mish, appearing on several National TV business shows, has continued to “buck” the trend and convey that she was not excited about buying stocks and felt that the markets remained “rangebound.”
Even after a huge one-day rally. For those of you not so familiar with rangebound, it literally means: it is a traders’ market. A huge move up over a day or two followed (like this week) by sudden reversals and two down days.
The market has been exhibiting patterns like this since the beginning of the year. It is a choppy churn and, for most investors, exhausting. Little to no progress is made for the average investor. If you follow the likes of ARK Innovation ETF (NYSE:ARKK) and other recent hot dot managers, it may mean your investment is down 25-50%.
Investors need to stay apprised of one of the most important rules of investing. Rule #1 minimize losing money. Rule #2 don’t forget Rule #1. Here is an important chart to remind you of the dangers of NOT having your investment drawbridge:
Here are some ways that you could build your own drawbridge:
This week’s market insights:
1. S&P 500 Likely to Hold at 200-Day MA (1) Will S&P 500 indexes find support at their 200-day moving averages? We think so. Sentiment is quite bearish and the next batch...
Lately, volatility has been off the charts. We’re seeing triple-digit swings in stocks, and the market is getting a real taste of the wild ride that comes with a president who...
White House announces tariff exemptions for Canada and Mexico Soft ADP jobs report poses downside risks to NFP Euro extends rally ahead of ECB decision Wall Street rebounds, WTI...
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