The 1 for 15 Slump

My son turns two today. He loves baseball and now knows he’s the same number as Derek Jeter. Hence, this Jeter-inspired post.

Derek Jeter won one World Series title in his last 15 years in the league. Not many people think of him going 1 for his last 15. They remember the sheer dominance and magical moments during his first five seasons when the Yankees won four titles – including the record-breaking 125-win 1998 season and winning 14 straight World Series games.

All things, good and bad, come to an end though. It’s natural, but the opportunity is always in the now. Worrying about when it will end isn’t productive. Just know that it will and prepare as best you can for it.

Fundamental investing bases decision-making on what will or should happen. This makes seizing opportunity now extremely difficult. Fundamentalists routinely miss out on opportunities. When the Yankees were going strong from 1996-2003, many people were waiting for the inevitable reversal. “They’ve gotten lucky”, “This dominance can’t continue!” or “This won’t last” were regular comments. This way of thinking takes you out of the present and inhibits you from actually enjoying the ride as well as capitalizing on it.

Trend-followers don’t make this mistake. They know the trend can end at any time, but that the opportunity to make money is now. They manage their downside risk and go with the flow.

It’s tough to do, but I think it’s the healthiest and most repeatable way of capitalizing on trends in the markets. Most of the time, we cannot understand why markets are doing what they’re doing. We tend to get the explanations later in the ride or even after the reversal — when the opportunity is gone. Look to the markets for clarity.

Following the Financial Crisis, many people had trouble buying equities when many markets started making new highs in mid-2009. The crisis was still fresh and people thought the rally off the March lows wasn’t to be trusted. Welp, the uptrend continued on and many people missed out. A critical error you just cannot make if you want to make a lot of money.

Uptrends like the past 10-15 years don’t grow on trees. You don’t get a do-over. You must stay in the now and seize opportunity now. Try your best to enjoy it and realize that you must get comfortable taking positions that make you uncomfortable.

Go with the trend and manage your risk. It’s the healthiest way to play.

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