Fact: The top 20 poker players have taken home over $600 million collectively.
Quote: You can’t stop the waves, but you can learn to surf.- John Kabat-Zinn
Self-made trader Larry Hite said: There are just four kinds of bets. There are good bets, bad bets, bets that you win, and bets that you lose.
In life and poker, you need to know your odds. When you’re holding aces, you should bet big. The odds are on your side and you could win big. You may lose if someone else has a better hand on a fluke, but it’s a good bet.
When you have 8-deuce it’s a low odds hand. Would you advise anyone to cash out their retirement accounts to play the lotto? Nah, you gotta sit tight and be patient.
The Big Money Index
We are still in the red area. Day after day, buying is huge.
That doesn’t mean to go out and sell stocks. The BMI will tell us when the wave of buying crests. When it starts to decline and the data changes, that’s great information.
Now we don’t know when the massive buying will stop, and the shift will begin. It might be today or in 6 weeks. It’ll eventually stop though.
That’s what waves do – they reach crest points.
When will the buying wave crest? They say: don’t fight the trend. Well, don’t fight the BMI either. Generally, stocks head up if it’s rising. When it’s falling – stocks tend to follow. The BMI is accelerating right now. It makes sense given the one-way market the past 3+ months.
Health Care Crest
Want to see what a crest looks like? A few weeks ago, we talked about Health Care becoming overbought. In other words, buying was wickedly high.
That light blue line is the wave cresting. Buying has slowed and we expect the index to fall soon…
The big money is made by holding the best stocks over long periods. The big returns are made by being patient and going all in when you get handed aces. Those who went surfing when the odds said it was a good bet are enjoying great gains now.
Watch the waves and let them tell you what to expect. If it feels unnatural, just remember investing can be seen as chance or skill – just like poker. You can learn to win at poker and investing. Just ride the wave. “You can’t stop the waves, but you can learn to surf.” – John Kabat-Zinn