For investors just getting started in the stock market, the daily grind can seem like a dizzying confusion of numbers, predictions, and headlines.
Know-nothing CNBC pundits like Jim Cramer manufacture stories to explain market trends and blast them to the unsuspecting masses.
These narratives aren’t backed up by process or fact, but they seem useful in the moment.
It’s enough to overwhelm even the most seasoned investors… if you don’t have a process to separate signal from noise.
In today’s Early Look, Hedgeye CEO Keith McCullough cites a fantastic book by sports journalist Sally Jenkins called “The Right Call: What Sports Teach Us About Leadership, Excellence and Decision-Making.”
Jenkins describes how NBA Coach Doc Rivers observed some of his best players getting distracted by their cell phones in the locker room at half-time.
“Too many times to count, NBA Coach Doc Rivers has seen cell phones get in the way of winning,” writes Jenkins.
He wants no distractions for his players.
As Rivers explains, “When you come into halftime, you see guys on their cell phones looking at stats. Because I don’t allow stat sheets in the locker room. So, they’re looking at stats or they’re talking to their agents or to their wives.”
Focusing on these stats and what their agent (or wife) is saying about their performance doesn’t actually help win the game, Rivers explains.
If athletes playing at the highest level can be distracted, so can you!
“So you think that you have a hard time being disciplined and not being distracted by FOMO in this uniquely American #MOAB (Mother of All Bubbles) Stock Market,” McCullough writes.
The point is to stay disciplined and focus on what leads to long-term investing success.
Back to McCullough:
“Let’s just start with I wouldn’t call it #MOAB if it didn’t keep going up. That’s what epic bubbles do! And, obviously, with me being long of Large Cap and SPY Momentum (XLG and SPMO), I have to risk manage expectations alongside you!”
You read that right. Keith McCullough is long the “Mother of All Bubbles” … for now.
Why?
Let’s send it back to Jenkins and Doc Rivers:
“Rivers fervently believes a player is better off not focusing on anything that leads to scoring but on the elements that lead to teamwork, such as disciplined movement without the ball and sound defense.”
The point from both NBA coach Doc Rivers and former hedge fund manager Keith McCullough is the importance of eliminating distractions and emotions from decision-making processes.
Whether in sports or investing.
Keith encourages investors to have a repeatable process for interpreting market trends, being aware of consensus positioning, and consistently managing those positions with our Risk Range™ Signals.
This disciplined, process-driven approach is why Doc Rivers focuses on disciplined movement and sound defense in basketball.
Do you know what leads to long-term investing success for you?
“And, to be crystal clear on this,” McCullough writes, “I’m not saying you’re never going to lose money when the CNBC crowd does… I’m saying that, over the course of your Full Investing Cycle career, you’re going to be happy with YOUR results.”
In the rest of this Early Look, McCullough explains how to risk manage the Mother Of All Bubbles (#MOAB) and what would cause him to get out of being long MOAB.
He also applies our disciplined, investing approach to a specific stock example, Apple (AAPL), and how to manage a position like that using trend signals, hedging, and risk range signals.
This disciplined approach to decision-making in both basketball and investing leads to better performance and results.
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