I’m sitting in a bar in New York. It’s the Bull & Bear at the Waldorf-Astoria. The place just smells of money, lots of money. I’m sipping a scotch while waiting for a client. Little did I know, tonight I’d be learning an investment secret…
The place is immaculate. You can feel the history. The waiters and barmen are sharply dressed in black and white uniforms. Service is attentive, but not rushed. And the drinks are stiff. The dark wood paneling gives the room an air of importance, and dimmed lighting sets the stage.
This isn’t your ordinary bar. This place has history.
Billions worth of deals have been struck right in this very bar…
My dining companion this evening is a venture capitalist from Los Angeles. I’m working on a deal to raise one of his alternative energy companies $50 million.
He arrives in a flurry with his cell phone glued to his ear. It’s nothing new. He’s always like this. Always talking about the next deal… always closing new investors.
We settle in and after the first round of drinks, the atmosphere eases.
I give him a quick update on the deal. After a spirited debate about the next steps, our discussion turns to the market. I don’t want to miss this opportunity to pick his brain. I start firing away question after question about his business and his views on the market.
I figure somebody investing millions probably has an interesting thought or two… but what he said really surprised me.
Honestly, I don’t even remember the question… It was probably about some recent economic indicator. Something probably splashed across the front page of the Wall Street Journal. The question I don’t remember… What I do remember is his response.
“Forget it… It doesn’t mean anything.”
“What? What do you mean forget it?” I gasped.
“Forget it.” Then leaning in he said, “Look, some things matter. Some things don’t. The key is knowing what to look at and ignoring the rest.”
He went on…
“I don’t make money on the deals I do… I make money on the deals I don’t do. I look at hundreds of deals every week. If I spent hours on each and everyone, I’d never find the great investment ideas. Find what’s important and ignore the rest.”
What I took away from that meeting was nothing short of life changing.
My meeting took place a few years ago. But this little bit of wisdom applies to us even today.
Right now, we find ourselves in the middle of August. It’s one of the worst times to analyze the market. Why? Because everyone who matters is on vacation right now. Seriously.
As a banker, I’d schedule meetings year round except for the last two weeks of August. It was a sacred time. Nobody was in town. Not the money managers, not the hedge fund managers, not the analysts, not the bankers.
Everyone was on holiday. Some in the Hamptons… some in Europe.
The only people on Wall Street this time of year are junior traders and junior bankers.
If you don’t believe me, just look at trading volumes. They always fall off at the end of August. That’s why it’s important not to give too much weight to market action right now.
I’m a big believer and follower of market action. That’s why I’m studying the markets every day.
I’m still studying the markets. However, I’m not about to make any earth shattering changes to my positions this week or next. I’m not going to discover a major change in market sentiment… not this time of the year. Not the last two weeks of August.
We’ll discover the real direction of the market in early September. That’s when all the traders and money managers are back at their desks. That’s when the market shows its true colors.