Know Thyself

Are you ready to give up?

Don’t worry. You’re not alone. That’s what the market always does…

Humble you.

Turns out, investing isn’t easy. (Hint: It never was.) And anyone who ever told you it was, was making money accidentally.

Investing in stocks is more than just buying an ownership stake in a company. It’s more than just math on a spreadsheet.

It’s a lesson about patience. About the ability to fight every human tendency or emotion to act or react. About your ability to be a contrarian when millions of other investors are telling you you’re wrong.

Jim O’Shaugnessy said it best:

You shouldn’t invest a dime of your own money until you find out everything about yourself first.

It’s important that you invest because you feel like you have an understanding of what you’re investing in… not someone else.

Investing solely based on someone else’s research is a surefire way to lose you money.

Because truth is, the “experts” get it wrong just as much as the rest of us.

That includes Wall Street, economists, media pundits, and the like.

Morgan Stanley analyst Adam Jonas wrote up what looked like a well-thought research piece on Carvana — the auto e-commerce company. There were revenue and margin projections. Modeling assumptions. And total addressable market opportunities.

But the “expert” couldn’t have been more wrong.

Jonas’s February 2021 price target was $420 with a note:

Carvana’s stock fell 60% over the following 12 months. Yet there was no introspection or mea culpa from Morgan Stanley’s Jonas.

From Jonas’s March 2022 research note on Carvana:

Then, eight months later, out of nowhere, Jonas removes his price and puts its base case at $1 (if it can survive).

How many millions of dollars were lost from following Adam Jonas into Carvana?

It doesn’t get much better.

FactSet noted that the aggregate S&P 500 12-month price target based on Wall Street analysts’ single-stock price goals was 5,225, 11 percent higher than 2021’s close.

You’d be down huge if you simply followed Wall Street.

It’d be unwise to take any one data point from anywhere and use that as your thesis to put money to work.

You’d be broke trading off Wall Street’s price targets and the number of times they’ve “updated their models.” (They’ll make money off you no matter what.)

That’s why it’s important to know yourself. Because, you’re the “sucker” if you’re getting a tip from mainstream media or investing based on a Wall Street report.

Here’s what we said December 22nd, 2021 titled Know The Game You’re Playing:

There’s so much financial noise in this world.

Every data point you receive when it comes to investing in something should be part of the reason… not the reason.

Know thyself. Invest because you’re confident of a future outcome. Not because of someone else’s confidence.

Good investing,

Lance

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