Bull Markets Aren't Always Easy Money. Here's Why
I joined Twitter in January 2013. Since then, I have made many contacts and shared various interactions along the way and online in general. One key point that I have noticed clearly is that even though we are in a very strong up trending Bull Market in stocks, very many people have publicly short, negative about stocks or out of the market entirely and have very strong opinions about it. The average person seems to think that new highs and bull markets equal "easy money", but even at new highs in the S & P 500 and various other markets, not everyone is making "easy money" or making money at all in the market. It has nothing to do with the market and everything to do with the trader/investor and their beliefs and biases about markets. In short, many overthink things, or think they can call the market based on the limited amount of data they have.
Jesse Livermore, one of the greatest traders who ever lived, famously said: “The market does not beat them. They beat themselves, because though they have brains they cannot sit tight.”
Paul Tudor Jones, a legendary billionaire trader, put it quite clearly: "At the end of the day, your job is to buy what goes up and to sell what goes down so really who gives a damn about PE’s?"
But people do "care" about PE's, and indicators, and Central Banks, and data, and predictions, and 1929 overlays, and more data, and more indicators, and various other assorted statistics that do not have any direct correlation to price. The only metric that determines P/L is price. There is no qualifier on anyone's brokerage statement for volume, PE, divergences, correlations or anything else. Price = P/L. So if commons sense, and Paul Tudor Jones, say to buy what is going up, why have so many publicly missed out, or worse yet denounced this Bull Market as "unjustified"?
There are likely many answers, but two clear conclusions from my experience with others is that:
- People want to "understand" why markets behave the way that they do, and if they can't understand it, they often feel the price is wrong or unjustified.
- People think that they or others can actually connect the dots of fundamental and/or technical data and forecast future market moves, which may not be in line with current market action.
I have often said I don't know why people spend so much time looking at everything other than price to try to predict what price is going to do or "should do", when price itself is simple enough to follow objectively, and in reality, being in line with price is what generates profits over the long term. This is one of the many reasons that I abandoned discretionary trading long ago, and began to employ a systematic, price based approach. I accepted long ago that neither I, nor anyone else, could consistently and profitably predict markets over longer time frames. Once I stopped trying to predict, or fight the market, and started to get in line, I started to consistently make money over time.
The harsh reality is that markets go where they go, and no matter how much money, data, or information someone has, there is always someone with more of all of it, on the opposite side of their trade. My results increased dramatically when I accepted that the future is unknowable and that simply following price without bias would get me on the right side of more trades than anything else.