Rodney Johnson | Friday, May 10, 2013 >>
I stay away from giving parenting advice. Mostly I just tell stories of mishaps and upsets my own three kids create, while leaving the judgment calls to others.
But there is one thing I can tell any new parents that’s helpful and non-judgmental. That is, create a routine.
Setting up an environment where kids know what to expect will reduce everyone’s stress and allow the kids to grow up with fewer concerns. Schedule and communicate everything from meals, to bedtimes, to family time. Babies thrive on schedules, and older kids, even when they don’t know it, use routines to build comfort zones.
But don’t think routines are only good for kids…
My coffeemaker is set to brew at 4:50am. I get up every weekday at 5:00am. I sit down on the couch a few minutes after 5:00am and flip between the futures on CNBC and my local Fox station while I drink coffee and put on my running shoes.
I’m pretty predictable, to say the least, but that’s okay. It gives me the structure I need to get my days off to the right start. I also like ordering the same meals at restaurants, but that’s another story.
My point is that routines become ingrained in our lives and create comfort… as well as opportunity.
While each of us can have different routines in our personal lives, there are some bigger routines that create normal ebbs and flows for our society. Many of these routines are based on the calendar.
Think about shopping. We shop throughout the year for things like perishables. We even buy some durable goods and gadgets along the way. But most of our heavy duty shopping is reserved for the holiday season, which means there’s an emphasis on retailers for the months of November, December, and January.
Then there’s energy use. Americans love their cars and we drive endless miles. But the main concentration of our driving is during the summer months and, to a lesser extent, around Christmas.
In terms of home energy use, we heat our homes in the winter and crank up the A/C in the summer, with reliable breaks in the early fall and early spring. This creates down time for energy companies – particularly in the early spring – when they can shut down some production and perform routine maintenance on their equipment.
These simple examples should seem so obvious as to make you think, “So what?” There is a good reason I mention them. These are the exact types of routines, or cycles, that Adam O’Dell uses in his Cycle 9 Alert service to provide investors with an added advantage for creating gains in a difficult, danger-filled market.
Instead of trying to tease out the newest tech winner, or figure out what pharmaceutical company will win (or lose) FDA approval, Adam starts with the common sense view that much of our economy moves in cycles that are very predictable.
He breaks the investing world down into nine large sectors and then, using historical data, determines the short-to-medium-term cycles for each one. From there, he uses baskets of securities to identify the top and bottom companies in each sector so he can pinpoint companies poised to gain – or lose – big as the cycle starts.
This allows Adam to recommend when to get into a play and when to get out, again for maximum gains as the sector moves through its natural cycle.
But Adam doesn’t use Cycle 9 to recommend individual stocks. He knows too much about our analysis at Dent Research to go down that road. (In fact, he is the Portfolio Manager of our Boom & Bust portfolio where we hold mostly income producing securities on the long side of the ledger while we are short several investments as well.)
Instead, Adam uses options to gain exposure to the companies he believes will make the biggest moves. If the company is expected to ride a cycle higher, Adam recommends call options. If a cycle spells trouble for a company, Adam will suggest a put option. Either way, your risk is simply the price of the option, which should be a fraction of what an investment in the company stock would require.
If basing an investment strategy off of identifiable cycles and then using options to limit your risk sounds like a good idea, that’s because it is.
Since Adam’s service went live in beta testing last fall, the results have been impressive, posting average gains of more than 60%… per trade. This is a great way to augment your investment returns while we all wait out the craziness of the current Fed-fueled market.
Now I’ve got to sign off. As I’m writing this, it’s about noon and as everyone I work with knows, nothing stands between me and lunch at exactly 12:00pm. I love a schedule.
P.S. We’re just days away from taking Adam’s service live. Watch your inboxes early next week for the opportunity to take advantage of the power and success of Cycle 9.
Ahead of the Curve with Adam O’Dell
Just as daily routines ease the stress of life’s unpredictable nature, so too do investment routines. If uncontrolled emotion – excessive greed or paralyzing fear – is the downfall of every gone-broke investor… then the goal is to remove emotion from the process.