They say that life is a journey, so everyone should enjoy the ride. I’ve certainly had quite a journey myself since March of last year, when I got engaged in Orlando, Florida. And, with just eight days to go until I tie the knot, and after dozens of hours spent on various wedding tasks, I’m happy to report I’ve enjoyed the ride, too.
From the beginning, I wanted to be an involved husband-to-be; I’ve heard stories of guys who, when asked how the wedding planning was going, gave you a blank look and one of those, “Well, um ... " replies that told you the wedding was the last thing on their minds. I even know one person in the office who, years ago, literally got married the day after he flew back from service duty in Asia, saving him from any of the wedding planning. (I can neither confirm nor deny whether this person’s name rhymes with Gaul Poodwin.)
To each his own, of course, but I wanted to experience the gamut of emotions that I’ve heard about from other guys that went through the process. And I have! While I wrote about a few of the more frustrating and nonsensical aspects (the epic hunt for wedding ties, for instance), for the most part, it’s been fun and memorable.
In fact, as I’ve also mentioned before, I think the biggest aspect of today’s larger-than-life wedding planning process-our to-do list with just more than a week to go still has about a dozen items ... and everyone tells us we’re ahead of schedule-is the benefit of working together, facing some adversity, and (I hope!) a feeling of satisfaction knowing that we’re actually pulled off what is effectively the biggest and most meaningful celebration we’ll ever throw.
But, as a student of the market, and as a person whose passion is and always will be the market, I believe more than ever that this wedding process has lessons not just for life, but for investors as well. Here are a few:
You can’t force it: With the wedding, it takes two to tango, and no matter how much you might want to get something done, it’s hard to cross it off your list if your fiancée isn’t onboard. Same with investing-if the stock or market isn’t ripe, your best move is to take a step back and remain patient.
Have a game plan: Many people fear having a plan, feeling that it ties their hands. But a solid, well thought out plan serves as a roadmap, helping you deal with contingencies should they happen. That’s helpful in all aspects of life.
Step by step: You can’t fit 14 months of wedding planning into one day, just as you can’t achieve all your investment goals today. Both are marathons, not sprints, so don’t get caught looking too far down the road. One step at a time!
Stay optimistic: The difference between winners and losers isn’t that the winners never had bad days. That’s not real life! Instead, the winners shook off the bad times, learned from their mistakes, and got better. The failures, by contrast, constantly think back to those bad times, and refuse to move forward.
The good isn’t the enemy of the perfect: Not everything is going to be perfect at our wedding, and in the markets, even the best laid plans will occasionally go up in smoke. That’s OK. You can still make great money in stocks even with a bunch of mistakes (my own monthly winning percentage has been about 50% the past two and a half years), and as for my wedding, I’m confident we’ll all have a grand time even if the weather is crummy, or the beef is a bit undercooked.
For those of you sick of all my wedding rants during the past few months, you can rejoice, as this will be the last of them.
But for those of you who sent along warm wishes, my thanks go out to you-I’m thankful for all the support I get as I enter the next phase of my life.
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Taking Your Time
The last lesson I’ve learned is very applicable to today’s market: It’s OK to be undecided, or to lack strong convictions, at certain points in time. In terms of the wedding, there were many times when I’d be ready to put down the TV remote and dive into a task. But when I asked my fiancée her opinion, she’d simply reply, “Gee, I haven’t thought about it yet; give me a day and I’ll let you know.”
There’s nothing wrong with that-there’s little worse than spending hours on a task, only to have to redo it later because the result was not what was wanted.
In terms of this market, I have to admit, I have mixed emotions. On one hand, the market’s sharp pullback last week was expected; I’ve been writing in my newsletters that a correction was likely, as sentiment had become elevated, and the market loves to dish out punishment when most investors are jubilant or at least complacent.
And, really, last week’s market drop didn’t do any permanent damage. Few leading stocks broke below their all-important 50-day moving averages. The major indexes are in similar shape; in fact, the growth-oriented Nasdaq is outperforming the Dow Industrials and S&P 500, usually a good sign for the market’s future.
On the other hand, those same indexes all were soundly rejected at their declining, long-term 200-day moving averages on big volume, a sign institutions were selling. Leadership has been concentrated in the commodity issues, which isn’t usually a great sign. And the oil upmove is so widely known and talked about that we believe a pullback in black gold is around the corner, which could damage the oil sector, the market’s #1 group.
So we’re back in a situation with plenty of crosscurrents. Our major market timing indicators are still bullish, so I’m not expecting any serious selloff ... yet I’d be lying to you if I don’t have my eyes open to such a thing.
One thing for you to watch: Financial stocks ... and Lehman Brothers (NYSE: LEH) in particular. In my view, LEH is the canary in the coalmine; the stock is threatening to break down again here, as rumors fly that the company owns a boatload of vague debt instruments that are worth next to nothing. It’s not alone-many big banks like Wachovia (NYSE: WB) and Bank of America (NYSE: BAC) actually hit new 52-week lows this week, a stunning sign of weakness.
But I believe Lehman is the bellwether for the bears. If it breaks below 35 in a decisive manner, I wouldn’t be surprised to see the overall market succumb to selling pressures.
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But why darken the mood just a week before my wedding day? The good news about weak markets is that it gives you a chance to identify the strongest groups and stocks. In fact, I believe we know the top leaders of the current advance, so it’s really a matter of trying to buy them properly, and avoid being shaken out on any pullbacks.
Instead of giving you one name, I’ll give you four, all of them tied to the steel industry. Each has appeared in Cabot Top Ten Report in the weeks (even months) past.
Cleveland-Cliffs (NYSE: CLF) is a leading producer of iron ore, which is a key raw material for steel making. Iron ore prices are literally exploding higher, and CLF is expected to earn nearly $10 per share next year (the stock is currently just north of 100).
Walter Industries (NYSE: WLT) and Alpha Natural Resources (NYSE: ANR) are two leading producers of metallurgical coal, another raw material for steel. Because of floods in Australia, natural disasters all over the globe, and strong demand for steel and electricity in emerging economies, prices for all sorts of coal (and especially metallurgical coal) are skyrocketing.
U.S. Steel (NYSE: X) is currently the #1 stock in the steel group, and for good reason-it owns much of its own iron ore and metallurgical coal production. Thus, it’s able to raise prices significantly, while keeping its own costs contained.
The bad news is that all of these stocks are extended to the upside; it’s always tempting to chase things higher, but I advise against it. Besides, history tells us that the leaders always pull back eventually, and give you an opportunity to get on board. These stocks are at the top of my own watch list, and if they do suffer a shakeout, I’ll be all over them.
Until next time,
Mike
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