Timing is everything! – 01-01-2018
I always love to look for market parallels in the various books that I read. Jason Calacani ‘s new book Angel has an interesting statistic. It says that Google was the twelfth search engine; Facebook was the tenth social network;iPad was the twentieth tablet invented! Can you imagine this? I never knew these to be facts. You always think that the winner was the best guy or even the first guy who thought up the idea. Like who remembers any other search engine other than Google? Yahoo thrived for some time, I know, and there was some desultory attempt by Microsoft with Bing but none of them made the cut. There was something called Orkut I recall which was a bit of a rage before Facebook came on the scene and wiped out Orkut. And honestly, I cannot even recall a tablet before the iPad- though there were many me-too versions that never quite caught on.
So, what does all this show? As Calacani makes the point in his book, it is not about being the first. It is about being the first when the market is ready for it!! I recall another TED Talks where the speaker said that the biggest reason for the failure of a start up was not (as usually expected) inadequate capital or a poor idea or even good execution. It was improper timing to the market! Ideas that came to the market at the right time succeeded while those that came either early or late (even if they were good or better than others) failed to click. Steve Jobs had different ideas about manufacturing computers way back but it took him many starts and several years in the wilderness before he hit it big. In and thru those years he went thru products like Lisa and Mackintosh and NeXt etc that simply did not succeed. And one fine day, bang! Apple took off and has not looked back since!
What can be the connection to the market? Timing! People keep going on and on about why one should NOT time the market but, meaning no disrespect to all those that say so, I think that is garbage advice. They should, instead, be saying that don’t time the market if you don’t know how to! However, if you indeed master the art of timing thru deft usage of technical analysis, then chances are that you will not have many more hits than misses. If timing is the key to success to a great many enterprises, why should it be different for stocks? A well timed purchase or sale is the key to the bigger fortunes. Imagine if Soros had missed that big short on the Pound by a few days? Just think, what if you had not bought your last multibagger when you did? Lets take an example. A recent case of a rocket stock has been Graphite or HEG. You made your bundle if you had bought it in Jan 17. In the period of 2011 till end 2016 if you had bought that stock any time you would have made almost nothing! One could argue that the price rise in graphite electrodes happened recently. Like that there will always be a reason every single time- for something to have happened or not. There are countless examples like these. I just chose Graphite as it is more recent one and also an impactful advance.
This also brings to mind another point in Calacani’s book: There are two types of business in my world, he writes- the one that make a profit and one that sell for a profit. He is of course talking from an angel investor point of view. But I believe this is another point that can be linked to the market. Much is made of owning “good “ stocks, fundamentally good ones. Nothing wrong with that concept. But the whole idea is, are they going to sell for a profit? Because, that is the goal of this game of investing and trading, isnt it? Are you here to become an owner or are you here to make some money? You better decide. It is nice to own good stocks, watch them grow slowly thru the years (assuming that you picked that well) and reap dividends, other benefits and hopefully, price gains too, across many years. But think. Are you made up of this kind of personality? Most of us are not. It is nice for the icons to come on TV and say you should hold for 10 years or more or get impressed by likes of Warren Buffet and their ideologies but remember this too. Buffet ‘s billions rolled in after he was well past 60! Are you ready to wait those kind of periods? I doubt if that is the case for most. If you are one such, by all means follow that advice. But if you are not, then that advice, however well intentioned and solid it may be, is just not for you!
Ultimately, as again Calacani writes, we are all judged by our successes. The world remembers a winner. They get featured in the press, have TV interviews and make it to the covers of magazines. They become the icons and subject matter of discussion and emulations and create aspirations. But for every success icon, there are at least a hundred others who fell away along the road. I learnt this lesson a long time ago when I read a book called They Also Ran by Irving Stone, a book that discussed the lives of US presidential candidates who lost. Each and everyone of those were worthy candidates but didn’t make it as a winner. And the world doesn’t remember them at all.
It is exactly the same in the markets. A trader is only as good as his last win. An analyst is only as good as his last successful pick. An investor is only as good as his last big winner in the portfolio. Who cares about your talent and your skills if you cannot translate them into wins?
So we come back to the point I was making earlier- can the stock be sold for a profit? Thats the only thing you should be bothered about. No doubt a stock with a better pedigree has a greater chance to sell at a profit but that is not necessarily the case every time. We are just playing the odds here. Even operator driven stocks from the junkyard make profits for some people so long as they can time it right! Fundamentals enable us to make a judgment about possible future value of the stock. Technicals will enable us to judge whether the market agrees with your assessment of the stock’s potential and the pace at which it is occurring. The pace may be quite at variance with your expectation. This is where timing comes in. If done well, it increases the odds of your success.
And that is the only yardstick we get measured in the market by.