Rev Shark: Don't Argue With the Market

The next mile is the only one a person really has to make.
-- Danish fur trapper's expression
One of the easiest ways to find yourself out of step with the market is to look too far down the road. We can always make a good argument for why things are bound to eventually change, but it seldom pays to argue with what is presently happening in front of us.

The market has a tendency to trend, and those trends don't end easily or logically. Most often, they will persist far longer than we think are reasonable and they will reverse only when few are prepared for it.

The present rally, which kicked off a couple weeks ago on earnings from Goldman Sachs ( GS) and Intel ( INTC) is a particularly good example of a trend. It has already gone much further than most would have predicted and has been astonishing in its persistence and lack of pullbacks.

For many, including me, the breathless excitement in the market seems out of step with the much more sober views on Main Street. While Wall Street is celebrating the deceleration or our economic meltdown, many ordinary folks are still very concerned about unemployment, real estate prices and the pace of any recovery.

Bur our job as traders isn't to worry too much about how realistic the market might be but rather to embrace what is happening now and try to profit form it. What is happening now is a tremendously strong rally that has many folks scrambling to find a way to enter this market. They aren't seeing any meaningful pullbacks, so they are paying up and chasing stocks that, in many cases, are already extended.

How much further will this extended market run before we have a meaningful correction? I have no idea, and I'm not going to try to anticipate it. I'll simply accept the fact that we have a strong market and try not to question it.

One of the easiest ways to improve your investment results is to simply not argue with the market. It is not a rational beast, and no matter how logical or insightful you might be, you are never going to win an argument with the market. It may eventually come around to your viewpoint, but you can become broke pretty fast if your timing is off.

This morning the market is seeing strength once again as Asian markets recovered from a one-day thumping and a flow of good earnings reports continued. It isn't easy to find new buys in this market, but it is far more dangerous to not respect this great strength.

At the time of publication, Rev Shark had no positions in the stocks mentioned.


Know what you own: Other financial stocks include Morgan Stanley (MS), Bank of America (BAC) and JPMorgan Chase (JPM). Other semiconductor stocks include Texas Instruments (TXN) and Analog Devices (ADI).

James "Rev Shark" DePorre is the author of Invest Like a Shark: How a Deaf Guy with No Job and Limited Capital made a Fortune Investing in the Stock Market. He is founder and CEO of Shark Asset Management, an investment management firm, and he also operates sharkinvesting.com, an interactive online community that serves and educates active investors. DePorre holds business and law degrees from the University of Michigan, is a member of the Michigan Bar Association and a former tax attorney and CPA. He lives in Anna Maria Island, Fla., with his wife and two children. Under no circumstances does the information in this column represent a recommendation to buy or sell stocks. Rev Shark appreciates your feedback; click here.

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