We often hear the term ‘game-changer’ and most people grasp the inference. After all, the Merriam-Webster dictionary defines it as “a newly introduced element or factor that changes an existing situation or activity in a significant way”. In other words, there is a definite cause-and-effect dynamic at work.
We hear this word applied to news of a Fed report, a merger, a commodity price breakout, and so forth. For the most part, investors think the ‘game-changer’ is important to their success.
Let me tell you, it’s all a crock of nonsense.
The truth is that big money investors accumulate their positions over many months when they have been manufacturing negative narratives so that inexperienced or uninformed investors will sell to them at low prices. When the big money has established a large position, they seize the opportunity of these game-changing factors, regardless of how insignificant and unimportant, to change their narrative from negative to positive. The buy low/sell high process then reverses as the big money players profit from their gains.
No matter how many times I say that I buy into weakness and sell into strength (i.e., buy low/sell high), this good advice is ignored.
Marshall McLuhan had it right when he said the medium is the message. Investors always believe that financial giants like Goldman Sachs, UBS, and Morgan Stanley would not mislead them, but the fact is they do. They buy back their shares always at the tops of market cycles, and never at cycle bottoms. The public sees them buying high and selling low and then figures it’s ok.
How many times have I said that when you hear of a company buying the stock of one of your holdings to then sell it? I say that because whenever the public hears these sell-side analysts exclaim with bated breath the need to buy the game-changer, I know it’s the best time to sell.
Hopefully, you will think about this in a market melt-up as you are being sold this “crock of nonsense” that there is a game-changing event that is so bullish you simply cannot miss out. I believe we are going to soon experience that market melt-up.
As an aside, let me tell you what a former partner, someone who was a world-famous investment banker i.e., sell-sider, told me as a word of advice: “Bill, the biggest suckers in the world are stock promoters and their followers because most of them actually believe the b.s.” In other words, he was telling me that it was always easiest to get these companies to do a financing when their stock was over-priced.
Think about it, please.