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Long day, late post, typical Tuesday.
Today I want to talk to you about my “memory bank.”
Bad name? Maybe. I haven’t put much thought into it and honestly didn’t ever expect to be writing about it so you can’t blame me.
But this mental bank account, and I mean this sincerely, not in the preachy kind of way, is the most important bank account I own.
I add to it on a weekly basis as I observe how the people around me, those who I look up to most, approach difficult conversations, deliver good and bad news, lead teams, and ask for things to get done.
I pulled a few of these golden nuggets out for today’s post.
On life:
“If it’s not an obvious yes, it’s a no”
“Money has a gravitational pull to where it’s treated best”
“There’s two types of people: those who say they’re going to do things and those that actually do”
“Never assume malintent”
“We need to avoid bike-shedding at all costs”
“Just take a beat. We don’t have to decide now”
“I’d rather do something halfway right by Monday than perfect by Friday”
On investing and markets:
“It takes a lot of E to offset P/E”
“The stock market is the best economist I know”
“Markets bottom on bad news”
“Never buy a stock under $5, only zombie companies trade under $5”
“Markets move first and reasons follow later”
“All gaps get filled”
“Money rotates. It never stays still.”
“Credit leads equities”
“Bull and bear flags fly at half mast”
I can’t say if every “golden nugget” above is inherently “true.”
But they come from people that are older, wiser, and who I look up to deeply.
If I thought they were misleading me, then I would be assuming malintent.
Recall, golden nugget #4 taught me not to do that.
I captured one of these golden nuggets from Chris Verrone on a TCAF episode last month.
The media team clipped it like the GOATs they are.
The short is linked below. It’s the last 1/3 of the clip that is seared into my brain.
I’ll quote Chris directly for you because if I tried a million times I couldn’t have said it better.
“Everyone gets the sequence of events wrong in this business. They start with ‘What do I think?’ then find the price to justify it. No, no, no. What is price telling us? Now let’s spend some time imagining what that could mean.”
-Chris Verrone, CMT, Strategas Research Partners
Pause on that for a second. I did when I heard it. That’s why it’s deep in my memory bank.
Chris is saying that most people create a narrative in their heads and then try to find what is happening in the markets to justify that narrative.
His philosophy flips that idea on its head.
Instead, Chris is saying that we as investors should be first watching price and thinking about what world events may ensue based on that price action.
Here’s a recent example.
XLE (energy) was up 25% YTD before Operation Epic Fury began on February 28th.
The price action leading up to the geopolitical did more in forecasting its severity than any “forecast” ever could.
That’s the value of starting with price and then backing into the narrative.
Into the memory bank it goes.
Thank you, as always, for reading!