Do You Have Enough Time or Money to Be Right?

There is only one way to never be wrong: hold on until you win.  The financial cost and mental anguish are too expensive for investors to not take a loss with the exception of a rare few.

Remember the market is never wrong.

Physical goods like commodities have finite supply. Though emotion and greed drive prices in the short term eventually supply and demand determines value.

An old trading axiom “Cure for high prices are higher prices” has an equal collary that may be more appropriate in these deflationary decline times.

First off remember back to $100 plus crude oil and the investment in exploration. New technologies were developed to extract the black gold in ways that were not cost effective at lower prices.

Oil sands, horizontal drilling and fracking unlocked a bounty of oil that had never been accessible. Billions of dollars were spent on oil projects on promises of high returns on triple digit oil.

Eventually, these activities created a supply glut which has hammered prices. Supply and demand are powerful forces that eventually win out.

Commodities have been in a downtrend for years with global demand slowed and the strong Dollar depressing value. The “Cure for low prices are lower prices” mantra is appropriate in gold, copper, corn and oil at multi-year lows.

Cutbacks in production will eventually reduce supply and support prices someday in the future. The exploration to production cycle in mining metals or drilling for oil takes years at minimum. A canceled venture or closing of a mine will show up later when the supply equilibrium again gets out of whack.

Crude oil may be nearing that extreme reversal after the hard fall decimated the industry. Companies were quick to halt drilling and get offline. A move back down to $40 makes it unprofitable to get oil out of the ground with many of the newer technologies.

High or low markets will go eventually. Supply and demand determine price.

The amount of time it takes to find that balance can bankrupt stubborn investors.  The market is never wrong, maybe incorrectly priced in some eyes, but that fight is hard to win.

The greatest investor in history Warren Buffett has the luxury of having enough money and enough time to be right. Do you?