Could have, should have and would have
These three small and incomplete sentences are one that we hear most often when discussing investing and the commodities markets. The great thing about these three phrases is they can be interchanged and say the same thing many different ways.
Here are our favorites:
I could have done it, I should done it, and I would have done it if I would have known.
I would have done it, and I should have done it if I could have done it, but I didn't know.
When looking at both of these statements you can be humored by the way each sentence is changed to basically say the same thing. But really the meat is in the last few words--if I would have known.
Now that the 2011 investing year is almost over we have people constantly telling us things they should have done if they only would have known. The biggest one is looking at their investments and coming to the realization that their investment account is most likely going to be very close to breakeven at the end of the year. And although given the state of domestic and global affairs this might actually not be a bad thing.
But when you look at all of the anxiety throughout the year a lot of investors start to wonder if they would have been better off not having their money in the markets. Over the last year we have written many times about using certain unbiased indicators to help guide in the decision making process. We use Point and Figure technical analysis to help us with the "if I would have known" and the "but I did not know."
The chart of the S&P 500 (provided by yahoo.com) shows that in 2011 where we started is going to be close to where we end if things don't move too much in either direction. The S&P 500 closed on Dec. 31, 2010, at 1,257.64 and right now it looks to be hovering around the 1,140 level. So basically it is going to be a breakeven year that had more of a roller coaster feel to it than a nice level line like we have drawn on the chart indicating the starting point of 2011 and extended for the entire year.
It is clear, when looking in the rear view mirror, that there were opportunities some fairly large swings in the S&P 500. It is just as clear that being a spectator would have been much better than being a participant. Although there was a lot of movement in our technical indicators, there were two strong signals that could not have been clearer in a call to action. The first set of sell signals came to light at the beginning of May and the last signal was set on May 16 that it was time to exit the market. Heeding this advice would have removed an investor for the market at 1,328. The market had topped out at 1,370 in April. After all the smoke cleared from the raging fire in Europe and all kinds of missteps in the U.S. the indicators gave the "all clear" on Oct. 10 at 1,194. The 52-week low is 1,074.77.
It is pretty obvious to see that missing the fall from 1,370 to 1,074.77 would have saved considerable resources that were then available to deploy when risk had been wrung out of the markets. Knowing what to do is key to making good investing decisions. Knowing when to implement your strategy is just as important. As we have mentioned before, technical analysis give us the "when."
Of course no good article about investing could go without us disclosing that the information provided in this article is for educational and informational purposes. Investors should consult with professional investment associates before investing. Although our article implies that investors should have sold all of their investments on a certain date and reinvested on another day, we understand that doing so is not how most professional investment portfolios are managed. Our objective is to illustrate that there are different ways to look at the investing markets.
We also want to wish everyone a Merry Christmas.
Editor's note: Agvisors provides commentary about agricultural markets, including grain, dairy, livestock, equities, financials, and energy, highlighted by a live weekly webinar discussing conditions and responding to questions. For more information, visit http://agvisors.com.