Why It Pays to Be Cynical

Here’s your “Slap in the Face” Award for this week. It’s a response to some feedback I received recently and a new contrarian buy indicator. I think you’ll like this one.

A Member wrote in recently and said that after following the “Slap in the Face” Award for a couple of years and finally getting the chance to see me speak at the New York Private Wealth Seminar, she is now convinced that I am a “sarcastic, cynical, old goat,” and she loves me for it.

Thanks, sort of…

I wish I could say she was wrong, but she’s probably right on the money.

But after 30 years in this business, who wouldn’t be sarcastic and cynical? Being that way does have its upside.

Here’s how…

The longer I’m in this business, the more contrarian – it’s a nice word for cynical – I become. Many of you have heard me paraphrase Baron Rothschild over the years, saying, “Buy when there’s blood in the street. Buy when everybody else is scared. And if the average guy is buying, it is time to sell.”

Yes, I know that all sounds cynical and sarcastic, but it works.

And there’s a new indicator out there – one that’s new to me and appears to be a pretty good contrarian buy indicator.

And yes, it helps to be cynical and sarcastic to trust this sort of thing.

It has to do with how people react to down markets and how often people search for the words “Dow Jones.”

One week during the selling in August, the number of internet searches for “Dow Jones” was up 28% over the peak in May. And May was a tough month.

Twenty-eight percent sounds like a lot, but it is still 14% below the high set last December. I’m sure we all remember what December was like in the markets.

And that huge December search number, for my money, is a big plus for the accuracy of this indicator.

It takes a lot of years to accept the hard truth that if the little guy is worried, if he’s selling and now if he’s searching for “Dow Jones,” it’s probably a solid buy signal.

So take it from this “old goat.” If you’re one of the Joe Mainstreets out there and your gut is telling you to sell into any big dips, or if you find yourself worrying more than usual, there’s a very good chance your gut is wrong.

And thank you for the “cynical and sarcastic” comment. At least I know I’m coming across accurately.

That’s it for this week. Have a great weekend. As always, thank you so much for being a part of us, and I’ll see you next week.

Good investing,

Steve