Why Price Is All that Matters

Last week I held a Q&A session for a select group of Dent Research and Cycle 9 Alert readers.

One question really got me fired up. It’s still ringing in my ears, in fact.

“How can none of it matter?!” asked one well-informed reader.

“At a time of such geopolitical uncertainty,” he continued, “with anti-establishment politicians winning elections in the U.S. and Europe…”

“…with wars underway in the Middle East and about to break out in Asia…”

(That’s all true, by the way.)

“How can it not matter what’s happening in the world!?”

To put this astute reader’s question into context, I had given a presentation earlier in the week explaining, essentially, how I consistently find short-term profit opportunities… “No matter what the broad market is doing… no matter what’s going on in the world,” I said.

I of course backed it up with proof, showing the numerous double- and triple-digit profits I’ve pointed my Cycle 9 Alert subscribers to over the last five years.

But that wasn’t the provocative part, to this reader.

What really seemed to get his goat was me telling all 14,000 attendees that “fundamental” factors, like P/E ratios, and “macro” factors, like geopolitical tensions… anything and everything you read in the news, I said, “None of it matters!”

If you missed my Q&A session, you can check it out here. I give what I think is a pretty impassioned answer to this reader’s question, explaining how my algorithm finds double- and triple-digit profit opportunities no matter what’s going on in the news.

Let me also explain here what I mean when I say, “None of it matters.” 

My wife and I recently sold a used couch on Craigslist. And the experience was a perfect illustration of two trading “commandments” you must know.

They are…

Commandment #1: Only price matters

Trading Commandment #2: Nothing else matters

What Is a Used Couch Worth?

So my wife and I bought a new couch recently.

Since the old one was still in good condition, we decided to try selling it on Craigslist.

We offered it for $100.

That’s the price we agreed on, despite my wife spending the prior week trying to convince me it was worth much more. She had all these reasons, of course… “It’s a good manufacturer…” “That micro-fiber is the easiest to keep clean…” “It’s sooooo soft!”

Even, I love that couch.”

But that’s about where we began to butt heads, my wife and I.

You see, as an investments guy… I know that something is only ever worth what someone is actually willing to pay for it, today, “cash and carry.”

My wife was thinking in terms of theoretical value. She was telling me what the couch should be worth. But her assessment was subjective, for one, and biased, to boot… given her self-professed “love” for the thing.

Long story short, the couch wasn’t worth $100.

We lowered the price to $80 and got one email, but no sale.

Then we lowered it to $50 and got three emails… and later that day, one warm body, with two $20s and a $10, took my wife’s beloved couch away… and taught her an important lesson: Something is only ever worth what someone is willing to pay for it.

That was true for our used Craigslist couch. And it’s just as true in financial markets, where buyers and sellers must agree on a price before a trade can be made.

My longtime Cycle 9 Alert readers know this trading commandment well. I’ve long told them that price is the only thing that matters.

When we make those double- and triple-digit profits, it’s simply because we bought at one price… and later sold at a higher price. We of course aim to buy low and sell high.

And when we take a loss on a trade, it’s only because we bought at one price… and later had to accept a lower price, even if we thought the security we bought “should’a, would’a, could’a” been higher. 

This is rather obvious, and nearly patronizing, for some readers to hear. But it’s always surprised me how tightly most investors hold on to the notion of fair value – what a stock should be worth – even to their own detriment.

I’m also surprised to see how many everyday folks try to invest based on the news and world events – as if they have some informational advantage, or intellectual advantage, over the big boys on Wall Street. (Hint: They never do).

That’s why I love to bring new readers into my Cycle 9 Alert service. I get an absolute thrill from sharing my expertise in time-tested systematic strategies with readers… watching them learnrn and appreciate the value in my way of thinking and investing… walking alongside them as they overcome limitations and achieve true success.

My longtime Cycle 9 subscribers know well the most important trading commandments:

#1: Only price matters

#2: Nothing else matters

We’ve locked in more than 70 profitable trades in the last five years based on these commandments alone.

And since our strategy is designed to capitalize on human nature – on the mistakes of other investors – I’m confident we’ll find at least another 70 profit opportunities ahead.

If you missed the Q&A session that prompted today’s discussion, we’re offering limited-time access to it here.

To good profits,

Adam O’Dell

Editor, Cycle 9 Alert

Follow me on Twitter @InvestWithAdam

Adam O’Dell

Using his perfect blend of technical and fundamental analysis, Adam uncovers investment opportunities that return the maximum profit with minimum risk.