My Biggest Edge in the Market
By Dr. Steve Sjuggerud
July 06, 2007
Jason Goepfert is the best at what he does.
And what he does is extremely important to me...
You see, when I'm looking for an investment, I look for three things: I want it to be cheap, hated, and just starting an uptrend. Experience has taught me that – if you can get all three of these things in a trade – you can make an extraordinary amount of money in your investments.
The thing is, it's easy to find trades with two of these three things. So those investments don't have much of a trading "edge" in them. The one thing that Jason does is the one thing that can give you a trading edge. Let me explain...
You can easily use a computer to find a stock in an uptrend. And it's just about as easy to use a computer to screen for investments that are cheap values. But it's very difficult to ask a computer to figure out if people hate a certain sector or investment. It's part number-crunching, part art, and part judgment. For me, there's opportunity hiding in there, and that's where Jason comes in...
Jason is the Dean of "Sentiment." I use his research every week, and I have for many years. To me, it is worth 10 times – or 20 times – what he charges per year.
Last night, Jason invited my family up for dinner with his family in Minnesota. And this part of the world, if you didn't know, is "Brats" country. (Jason is from Wisconsin. Sheboygan, Wisconsin, bills itself as the "Bratwurst Capital of America." Wisconsin's capital city of Madison claims it holds "The World's Largest Brat Fest" every year, though I don't know if any other cities vie for that title.)
We talked trading as Jason grilled up some real Wisconsin Brats...
"The Swiss franc looks like it's going to be a good buy..." Jason tells me, as he cranks up the grill.
His reasons sound a bit complicated if you don't know the lingo. But basically he believes two things: 1) There's nobody left to sell Swiss francs, and 2) When people start to get a bit worried, like now, they often move into the safety of Swiss francs.
To give an example of how he thinks, Jason says 90% of speculators have bet against the franc, based on "COT" (Commitments of Traders) data. This level is around a 20-year record. And the COT data has been a good historical trading indicator for Swiss francs.
If it's not time to buy Swiss francs yet, it's darn close, he thinks.
I value Jason's ideas. Since he updates literally hundreds of pieces of sentiment data daily, Jason is able to spot trends early. For example, Jason recently alerted me to the fact that "Credit Default Spreads" are widening – this to me is an early warning sign that big investors are getting nervous...
As this chart here from Jason shows, when big investors get worried (when the blue line goes down), stocks go down. The blue line is going down fast now... so based on this indicator alone, stocks could fall.
The reality is, at the moment, not a lot of trades are popping up on Jason's list of "sentiment" indicators. But that's quite all right with me. You don't have to trade all the time... just when the time is right.
For me, Jason's service helps me spot potential trades that others won't find...
Remember, there are millions of traders around the world looking for uptrends and values. You don't need much skill or insight to build a universe of possible trades in these... You just need a simple computer program to mine some data.
But solving the sentiment puzzle is difficult. I like the fact that it's hard to objectively measure "sentiment." Since it's part art and judgment, it will always be difficult to model in a computer program. That means far fewer people will be able to trade off of it. And those who figure it out can really use it to maximum advantage.
It takes effort to figure out the trades. But that's the way life goes. As much as people don't want to believe it, the world of investing offers no free lunch. (Well, there can be an occasional free dinner, like the one at Jason's last night. But you know what I mean...)
Thank you, Jason, for the real Wisconsin Brats... and the real trading ideas. I don't get enough of either back home in Florida...
Good investing,
Steve
P.S. If you're managing money or looking to track investor sentiment the same way I do, then you ought to give Jason's service a try. It is not for everyone. But for some (like me), it is worth 10 to 20 times its inexpensive subscription price. Visit www.sentimentrader.com for the details...
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