Great Investing and Trading Requires This ‘Weird’ Combination

Market action, like we have on Thursday, brings to mind something that Warren Buffett’s business partner, Charlie Munger, said: Good investing requires a weird combination of patience and aggression. And not many people have it.

Many market participants make the mistake of thinking that they always have to be active. No matter what market conditions might be, they want to do something. They are determined to take advantage of any opportunity that they may find, no matter if they have an edge or not.

The reality is that great traders have the ability to do very little and stay patient for long periods of time. They are not in constant motion, but they can shift very fast and make big, aggressive moves when conditions are right.

The ability to not do something when there is nothing to do is more challenging than it sounds. Many traders sit in front of the screen for hours, and this will make them want to stay busy and avoid the feeling that they are wasting their time.

Thursday is one of those patient days for me. I’d like to be more active, but I don’t trust this strength, and I think I will be able to buy stocks that I favor at lower prices if I stay patient. An index short may be a good play, but with the inflation data due Friday morning, it would have to be a day trade.

I’m doing nothing and feel pretty good about it. The S&P 500 is rolling over after the gap-up open, and even the mighty Nvidia (NVDA) may not be enough to keep the indexes from filling the morning gap.

I anticipate that the time to build bigger positions won’t happen right away, but when I sense a shift in market character, I will move quickly to put my idle cash to work.

The economic news this morning was not good as it showed that there was some bad data that helped to promote the disinflation narrative that drove the strength in January. While the Fed has recognized this and is set to raise rates more aggressively, the market seems to be fighting the Fed and is not doing a very good job of it right now.

The bears have the edge.