In a year where the markets whiplashed back and forth, driven by political announcements, Sherwood Forest Capital Management has kept its investors away from the cliff each time the global markets have been hanging by their finger nails. The intra-month swings are moved by a politician making an announcement that brings the markets back from a perilous plunge just before a total collapse.
In fact, if we look at the bigger picture, it is becoming clear that 2011 appears to be a potential transitionary year between the cyclical bull market of 2009 through 2010 and the next cyclical bear market. Every time the markets are brought back from the brink of disaster, it seems that the relative distance from the edge is less and less. From a trending perspective, it looks as if the downward trend is developing, but so far this year, has not yet been allowed to reveal its true nature.
The key question is when is this change in trend to the downside going to be recognized and how will you be positioned when the eventual outcome finally plays out. Do not confuse this view as one of a “perma-bear”. This view is driven by our focus on the “here and now”. The price action suggests that the trend has taken a long term change in direction to the downside, and until things change, this perspective should prove to be the most beneficial.
The challenge is to have the discipline to stay with the current evidence, while each and every rumor driven rally passes revealing greater weakness with each passing announcement. It is impossible to determine which rally will be the final one before the trend takes hold and has a meaningful move in the direction of the developing trend. The only way to insure ones success is to remain in line with the primary trend and manage through the counter trend rallies. During these times, most investors become impatient and frustrated as the daily media drives their emotional decision making. Their discipline is lost and replaced with the satisfaction of “moving with the crowd”, only to eventually have the primary trend reveal itself in a powerful and lasting move against the popular opinion of the day.
Why is it that so few actually profit from investing? It is because people generally do not have the discipline to avoid the comfort of moving with the crowd. When things become uncomfortable, or frustrating, people want to move to a position of ease. In fact, people will often feel better losing a lot of money, as long as everyone else is losing with them. This has been the case for the last decade, and will continue to be the case. In fact it has been the case for all of time. That is why a disciplined trend following strategy will always win out in the long run. And those who run with the crowd will always give their money to them.
-Doug Stewart, Founder and Portfolio Manager
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Message to Individual Investors – Our 2011 Value
In a year where the markets whiplashed back and forth, driven by political announcements, Sherwood Forest Capital Management has kept its investors away from the cliff each time the global markets have been hanging by their finger nails. The intra-month swings are moved by a politician making an announcement that brings the markets back from a perilous plunge just before a total collapse.
In fact, if we look at the bigger picture, it is becoming clear that 2011 appears to be a potential transitionary year between the cyclical bull market of 2009 through 2010 and the next cyclical bear market. Every time the markets are brought back from the brink of disaster, it seems that the relative distance from the edge is less and less. From a trending perspective, it looks as if the downward trend is developing, but so far this year, has not yet been allowed to reveal its true nature.
The key question is when is this change in trend to the downside going to be recognized and how will you be positioned when the eventual outcome finally plays out. Do not confuse this view as one of a “perma-bear”. This view is driven by our focus on the “here and now”. The price action suggests that the trend has taken a long term change in direction to the downside, and until things change, this perspective should prove to be the most beneficial.
The challenge is to have the discipline to stay with the current evidence, while each and every rumor driven rally passes revealing greater weakness with each passing announcement. It is impossible to determine which rally will be the final one before the trend takes hold and has a meaningful move in the direction of the developing trend. The only way to insure ones success is to remain in line with the primary trend and manage through the counter trend rallies. During these times, most investors become impatient and frustrated as the daily media drives their emotional decision making. Their discipline is lost and replaced with the satisfaction of “moving with the crowd”, only to eventually have the primary trend reveal itself in a powerful and lasting move against the popular opinion of the day.
Why is it that so few actually profit from investing? It is because people generally do not have the discipline to avoid the comfort of moving with the crowd. When things become uncomfortable, or frustrating, people want to move to a position of ease. In fact, people will often feel better losing a lot of money, as long as everyone else is losing with them. This has been the case for the last decade, and will continue to be the case. In fact it has been the case for all of time. That is why a disciplined trend following strategy will always win out in the long run. And those who run with the crowd will always give their money to them.
-Doug Stewart, Founder and Portfolio Manager
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