Minimize

Welcome!

Confessions of a Gold Analyst: Learning To Be Honest With Yourself – Part 1

September 18, 2015

Here is the latest from Avi. He will also be joining us on the weekend show so be sure to tune in for that!

As children, we are taught how important it is to be an honest person.  And, those that have children know that, when they are very young, they are brutally honest.  It is only as they grow older that they begin to learn how to stretch the truth, which then leads to lying.  Ultimately, as they learn to rationalize, which only comes with age and experience, it seems to suppress their natural honesty, and provides support for lying as an acceptable alternative to the truth.

Moreover, when it comes to the investment world, there is a bigger issue with which we must grapple, and that is when we lie to ourselves.   Unfortunately, when we lie to ourselves about our investments, we use every rationalization in the world to support our perspective for being invested in a particular stock or market, and we eventually find ourselves in positions of large losses.  The longer we are dishonest with ourselves, often, the greater the loss.

But, what keeps us entrenched in these positions as we continually lie to ourselves?  Do we have to be concerned that we are dishonest people the core of our being?   At least in most cases, the answer is absolutely not.  What keeps us entrenched is that the “lie,” supported by rationalization, is commonly accepted by the masses and often touted as “truth” throughout much of what you read about that stock or market.  And, as I noted above, it is the rationalization behind these untruths which really keeps us entrenched in that position.

I have often called this “falling in love with a story.”  Think about it.  How many times have stock ideas been presented to you, supported by the most amazing and compelling “story?”  The stories are often so compelling that you consider taking out a home equity loan to buy into this stock idea, as you believe it is such a sure thing.  Come on, now, be honest.  We have all been in this position at one point or another in our investment careers.  And, what is most often the end result of these phenomenal “stories?” Yes, they often result in losses.

I remember one of the most compelling stock stories of the last few years – AAPL stock.  Back in 2012, AAPL was in the midst of a parabolic run.  In 2012 alone, it increased by almost 100%.  And, the “stories” behind it were even more compelling.  For those that remember or were invested in AAPL at the time, AAPL could do no wrong.  I remember the euphoria behind the stock as it was approaching the $700 region (before the stock split).

And, the fundamentals on AAPL were stronger than ever.  In fact, the “story” was so strong, it led a number of analysts and investment advisors to be suggesting very highly leveraged long position strategies because the common belief was that it was a sure thing that AAPL was going to imminently exceed $800, and the only question in the public’s mind was how soon it was going to reach the $1,000 mark.  Yes, folks, this was the “slam dunk story” of recent times.

At the time, I remember issuing strong warnings, to those that would listen, to sell AAPL as we approach $700, because I believed it was set up to drop strongly to the $500 region initially. In fact, on August 27th, 2012, I published an article on MarketWatch calling for a top in AAPL:

“As for the larger perspective, with the expectation for a 5th wave extension, we are expecting a near-term top on AAPL, with potential targets at the 693, 712 and 722 regions. After AAPL hits this upper target range, I think we will see a sizable correction, which will likely take AAPL back into the 500 region. So, if you are an AAPL trader, you may want to ring the cash register over the next week or so, and prepare to reload at much lower levels for the bigger run yet to come . . .”

To be continued . . .

If you would like to learn an alternative way to view markets, rather than buying into the common “story,” come join us with a free trial to our Trading Room at ElliottWaveTrader.net.

Avi Gilburt
ElliottWaveTrader.net

Discussion
1 Comment
    Sep 18, 2015 18:03 PM

    Avi, story telling costs fundamental traders allot of $$$.