Diversification and Lear Corp(cont'd)
LEA hits target retracement zone !
In the last post I showed a chart of LEA with a projected price range for the target zone Wave 4 retracement to hit before then continuing upward in a new Wave 5. here is the chart again:
The next chart is from early this morning(10/27) showing price reaching about the midpoint of the target zone:
The low made a few minutes later was $160.43 . If this target zone is accurate, one would expect price to bottom out and then react upwards relatively quickly. Here is what the chart looked like about 35 minutes later:
As of the moment of this post price is at $166.92 , quite a rapid response! We will continue to keep an eye on LEA to look for a good buying opportunity which will be during the impulse up Wave 3 within the now forming larger Wave 5.
Diversification
The investment world, i.e. brokerage houses , asset managers, and large banking institutions have long maintained and sold the public on the concept that since you cannot possibly know what asset classes or specific stocks will appreciate, its best to diversify your investments and thereby reduce portfolio volatility and risk. While this may be decent advice for the masses who do not have the time or expertise to study the market and identify profitable opportunities, the basic theorem is wrong.
Warren Buffet and Charlie Munger have long maintained that “students in America go to elite business schools and learn corporate finance and investment management the way it is taught and then they write the whole secret of investing is diversification. They have it exactly back assward. the whole secret to investing is to find places where it is safest and wise to non-diversify. It’s just that simple. Diversification is for the know nothing investor”. If you would like to hear more of what they say here is their video:
In the next post I will discuss how to identify asset classes and sectors that can outperform the market while providing downside risk.