Pep Talk 7/6/2024: Historic Price Action & Historic Opportunity, Walgreens Versus Apple, And Keep A Positive Attitude Controlling What You Can

Stop whining and take advantage of the historic opportunity at hand...

• Pay no attention to skewed price action today, as it is not reflecting anything other than the whims of the voting machine.

• Apple versus Walgreens is a perfect example of the Haves and the Have Nots, one company an index favorite bid to obscene valuations, and another unbelievably cheap.

• Keep an even keel, and a positive attitude, as it is easy to get worn down in this trading and investing environment.

"Finance has three simple rules: maintain a clear mind, figure out asymmetries, never talk to idiots."

- Nassim Taleb

"If you can step back and take a longer time horizon, that is the big secret."

- Joel Greenblatt

"The longer I live, the more I realize the impact of attitude on my life. Attitude, to me is more important than the past, than education, than money, than circumstance, than failure, than success, than what other people think, say, or do. It is more important than appearance, giftedness, or skill. It will make or break a company... a church... a home."

- Dr. Charles Stanley

"If you invest the way people gamble at casinos you’re not going to do very well. It’s the long-term investment that works best."

- Charlie Munger

"Trading is not about being right. Trading is a game of math. It is about finding setups that offer you a good risk/reward and pulling the trigger."

- One Good Trade

"To me, making money is an interesting game. The reason I continue is similar to why top golfers keep playing. They're not doing it for the money—it's for the love of the sport."

- Warren Buffett

"As I look back now, it's obvious that studying history & philosophy was much better preparation for the stock market than studying statistics. Investing is an art, not a science and those who are trained to rigidly quantify everything are at a huge disadvantage."

- Peter Lynch

“Ultimately it is not the stock market nor even the companies themselves that determine an investor's fate. It is the investor.”

- Peter Lynch

"Complaining is not a strategy.  You have to work with the world as you find it, not as you would have it be."

- Jeff Bezos

Travis's Intro Note For Members:

First things first, as irrational as the markets seem today, this irrational price action is offering extreme opportunity, both in trading set-ups, and more importantly, in longer-term investing opportunities.  

Thus, when things seem like they don't make any sense, just tell yourself the crazier it gets, the better (this is literally something I say to myself).  Obviously, this is easier said than done, of course, and even doing this for roughly 30 years now, I get impacted by the emotions that Mr. Market elicits.

Having said this, we have seen this futile and opportunistic cycle of emotions multiple times in the history of The Contrarian, both with the broader market and with individual stock opportunities, particularly with Antero Resources (AR), Paladin Energy (PALAF), Peabody Energy (BTU), Occidental Petroleum (OXY), and Range Resources (RRC) to name a couple of our biggest winners over the longer-term.

At or near their price bottoms, for each of these aforementioned equities, the sentiment was extremely negative, and we felt terrible as individual investors, and as a group.

Turning to the broader markets, last week was a crazy, holiday shortened week of price action, with the market indices, led by the Nasdaq Composite (COMP:IND) surging once again, suspiciously on very low volume. 

This relentless rise in the broader equity market, led by a handful of stocks, with otherwise poor market breadth is partly a function of the relentless rise in valuation insensitive and price insensitive passive investing fund flows, yet it remains frustrating, much like price action in 1999/2000, except to a greater degree this time.

Digging into the S&P 500 Index (SP500) one can see the lack of breadth participation.

How will this negative divergence be resolved?

The answer is simple, either a widening of market breadth, or a broader equity market decline.

Ironically, a renewed capital rotation could accomplish both at the same time.

What Index Investors Face Today Resembles Japan 35 Years Ago

Imagine waiting 35 years to breakeven on your passive index investment vehicle.  

Sound impossible?