The Headline All Great Traders Hunt For
By Brian Hunt, editor in chief, Stansberry Research
November 2, 2009
"Buy when there is blood in the streets." – Nathan Rothschild
Back in his day, Nathan Rothschild was like Warren Buffett and Alan Greenspan rolled into one.
Nathan was one of the founding members of the greatest banking dynasty in history. He and his family bankrolled wars, giant gold purchases, governments, and anything else that could pay them interest. Even kings couldn't match Nathan's power and influence. He's considered the man who financed Napoleon's final defeat at Waterloo in 1815.
Today, many estimate the Rothschild fortune totals billions or even trillions. (The family has always managed their accounts the right way: So nobody knows how large they are.)
Despite the enormous wealth he accumulated, Nathan is best known by the classic contrarian investment quote above, which is No. 8 in our Monday series of all-time great trading quotes.
"Blood in the streets" has become a cliché, but for good reason: To make extraordinary gains, you must buy an asset near the point of maximum pessimism.
In Nathan's day, in 19th century Europe, folks had plenty of chances to buy when blood literally soaked city streets and battlefields. The developing nations fought hideous wars at least once a generation. In today's age of relative peace, however, it's tougher to follow Nathan's lead.
I can't tell you to hop on a plane and scout rental properties or stock investments in a war zone. So here's the main thing to take away from "blood in the streets"... Great investors and traders are like birddogs for news of disaster and despondency. They don't wince at headlines like "Gambling industry bankrupt," or "Indian stock market crashes for seventh day in a row." They get excited.
They know desperate situations create incredible values and incredible extremes in sentiment. They are always on the hunt for places where "things can't get any worse"... When things "can't get any worse," they can only get better.
It's only when things can't get any worse that you can buy world-class businesses for just four or five times annual profits... or safe bonds yielding 18%... or trophy properties for 80% below their highs. And despite what your emotions tell you, dark and gloomy situations have a way of working themselves out.
Note that in March 2009, most folks believed the Great Depression II was in the cards. There was plenty of blood on the balance sheets of bankrupt businesses and homeowners. The average stock climbed 60% in six months after the pessimism blew over. Many stocks climbed 200% and 300%.
So turn your completely normal, knee-jerk reaction to good news on its head. Don't rush out to buy a stock, a piece of land, or a commodity based on some bullish headline like "Analysts all agree... crude oil is going higher." Instead, hunt for headlines like, "Uranium prices sink to historic low... industry desperate for money," or "Argentina suffers currency crisis." Both of these headlines preceded huge gains in the past decade.
Like many great trading ideas, Nathan's quote has been "repeated" by other skilled investors: Warren Buffett tells us, "Be greedy when others are fearful and fearful when others are greedy." Steve Sjuggerud says, "You make triple-digit gains not when things go from bad to good, but when things go from bad to less bad."
However it's phrased, the idea behind "blood in the streets" is the same: Be on the lookout for desperate, blown-out sectors, commodities, and countries. This is where you'll find extraordinary deals. It's been the surest way to triple-digit profits for hundreds of years.
It will be the surest way for hundreds more.
Good trading,
Brian Hunt |
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| • |
Diesel engine manufacturer Cummins' profit beats estimates by 50%... stock jumps 6%. |
| • |
Makeup firms Bare Escentuals and Estee Lauder spike more than 10% to new highs. |
| • |
Booze giant Diageo hits a new high... up 7% in October. |
| • |
Earnings today... Chesapeake, ConEd, Dean Foods, Ford, Humana, SYSCO. |
|
Last |
Change |
52-Wk |
| S&P 500 |
1097.91 |
+0.94% |
+16.73% |
| Oil (USO) |
40.76 |
+0.77% |
-31.35% |
| Gold (GLD) |
104.23 |
+1.02% |
+35.00% |
| Silver (SLV) |
14.44 |
+1.51% |
+88.95% |
| U.S. Dollar |
75.28 |
-0.01% |
-9.39% |
| Euro |
1.50 |
+0.11% |
+12.20% |
| VIX |
21.49 |
+0.28% |
-69.44% |
| HUI |
448.69 |
+0.60% |
+120.38% |
| 10-Year Yield |
3.40% |
-0.02 |
-0.47 |
|
|
| Company |
Sym |
Industry |
Estee Lauder |
EL |
makeup |
Interactive Data |
IDC |
IT services |
TeleTech |
TTEC |
business svcs |
Martin Midstream |
MMLP |
oil & gas drilling |
Novartis |
NVS |
Big Pharma |
Waters |
WAT |
technical devices |
Harman Intl |
HAR |
electronics |
HMS Holdings |
HMSY |
business svcs |
Cardtronics |
CATM |
card readers |
Colgate-Palmolive |
CL |
personal products |
OGE Energy |
OGE |
utilities |
Williams Partners |
WPZ |
chemicals |
Insituform Tech |
INSU |
construction |
A. H. Belo |
AHC |
publishing |
Diageo |
DEO |
liquor |
Dr. Reddy's Labs |
RDY |
pharma |
CorpBanca |
BCA |
bank |
MicroStrategy |
MSTR |
software |
Natuzzi |
NTZ |
furniture |
Sony |
SNE |
electronics |
Mettler-Toledo |
MTD |
technical devices |
Evercore Partners |
EVR |
asset mgmt |
Williams Pipeline |
WMZ |
oil & gas drilling |
Kellogg |
K |
packaged food |
Linn Energy |
LINE |
oil & gas drilling |
Bare Escentuals |
BARE |
makeup |
Acme Packet |
APKT |
telecom |
Shire |
SHPGY |
Big Pharma |
MSCI |
MXB |
acquisitions |
Dionex |
DNEX |
technical devices |
Orthofix Intl |
OFIX |
medical devices |
|
| Company |
Sym |
Industry |
Aqua America |
WTR |
water utilities |
Array BioPharma |
ARRY |
medical research |
EPIQ Systems |
EPIQ |
software |
Ultralife |
ULBI |
electrical equip |
Amicus |
FOLD |
biotech |
First Bancorp |
FBP |
bank |
Farmers Capital |
FFKT |
bank |
TranS1 |
TSON |
medical devices |
MetroPCS |
PCS |
wireless telecom |
Global Ship Lease |
GSL |
acquisitions |
|
|
