Editor's note: Don't leave yourself vulnerable... With the bull market in full effect this year, investors have been exploring moneymaking opportunities across the entire market. But according to Brad Thomas – editor of The Wide Moat Letter at our corporate affiliate Wide Moat Research – you must implement a safety net if you want to safely navigate new sectors. In today's Masters Series, adapted from the December 2 issue of The Wide Moat Letter, Brad shares a simple strategy you can use to protect your investments no matter what group of stocks you're surveying...
Find Your Balance By Brad Thomas, editor, Wide Moat Daily There are a lot of ways to make money. But few are more dangerous than Charles Blondin's chosen profession: a funambulist. In 1859, Jean François Gravelet, better known as Charles Blondin, did something many thought was impossible. The 34-year-old French acrobat attempted to walk across the 1,300-foot expanse of Niagara Falls... on a tightrope. For obvious reasons, nobody had ever attempted it before. Blondin believed that he was born to do this. He said that a tightrope walker was "like a poet, born and not made." Blondin's manager, Harry Colcord, said, "Had he lived a century or two earlier, he would have been treated as one possessed of a devil... He could walk the rope as a bird cleaves to air." And the two of them – Blondin and Colcord – turned every bit of their Niagara Falls plans into a showcase. After months of promotions, an estimated 25,000 people gathered to witness the stunt. Gambling was rampant and untold bets had already been placed. A local witness reported, "There were hundreds of people examining the rope and, with scarcely an exception, they all declared the inability of Mr. Blondin to perform the feat, the incapacity of the rope to sustain him, and that he deserved to be dashed to atoms for his desperate fool-hardiness." The New York Times criticized the act, calling it a "reckless and aimless exposure of life," calling the spectators "thoughtless people" who enjoyed "looking at a fellow creature in deadly peril." Mark Twain later called Blondin an "adventurous ass." Yet, the prospect of catastrophe didn't stop the spectacle. A who's who of the Northeast society gathered on the banks of the Falls that day. There were judges, statesmen, and members of Congress in attendance. And they were all awestruck when Blondin, dressed in a flamboyant pink and yellow outfit, stepped out onto the rope. He held a 26-foot-long balance pole and strode steadily to the halfway point. At that point, the rope was sagging, and he was less than 200 feet above the rapids below. That's when Blondin stopped, sat down, and waved at the famous tourist boat, the Maid of the Mist, requesting that it anchor directly below him. Several people fainted, fearing the worst. But Blondin wasn't the least bit worried. He had prepared for this moment his entire life, walking on ropes tied between dining chairs as a four-year-old. As panic ensued in the crowd, Blondin motioned to the ship's captain, let down a line to its crew, hauled up a bottle of wine, drank it, then scampered across the rest of the cable. According to Smithsonian magazine, after Blondin reached Canadian soil, one of the onlookers exclaimed, "I wouldn't look at anything like that again for a million dollars." Yet, that original feat wasn't enough.
| Recommended Links: | |  Urgent Warning About the Magnificent Seven Across his 35-year career, investor Brad Thomas has appeared on Bloomberg and Barron's... interviewed over 100 CEOs and high-net-worth investors... and acquired a deep contact list of multimillionaires and billionaires, including Kyle Bass and President-elect Donald Trump. Now, he's warning that today's economic environment is set for a major rotation out of popular stocks like the Magnificent Seven – and those unprepared could be blindsided by the fallout. Read the full warning here. | |
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Over the next several months, Blondin would cross the Falls many times, adding new elements of difficulty with every crossing. On his original return journey, he walked across with a camera (which were large wooden boxes at the time) and snapped a selfie midway across the wire... He walked across without his balancing pole... He stopped halfway, turned around, then finished the journey walking backward... Once, he wore a sack over his body, meaning that he walked across completely blind... During one crossing, former President Millard Fillmore showed up and watched Blondin push a wheelbarrow across his rope... A few weeks later, he began doing somersaults and flips across the gorge... He also crossed it at night with locomotive headlights shining from each end... He wore shackles. He ate cake and drank champagne on the rope. Once, he carried a stove, sat down halfway, started a fire, cooked an omelet, and lowered breakfast to onlookers on the Maid of the Mist... Then, one day, Blondin decided he'd carry a man across. He offered to pay onlookers to take the journey with him. Unsurprisingly, nobody volunteered. With no other options, Blondin insisted that his manager, Colcord, join him above the Falls. Of all his stunts, this would prove to be Blondin's most dangerous... Early on in the walk, Colcord's fear got the best of him. Every time the ropes swayed, every time that Blondin moved one way, Colcord tried to overcorrect. He leaned the other way. He trusted his partner, but not enough to totally let go. Blondin stopped walking and said, "Look up, Harry... You are no longer Colcord, you are Blondin. Until I clear this place, be a part of me, mind, body, and soul. If I sway, sway with me. Do not attempt to do any balancing yourself. If you do, we will both go to our death." This tightrope walk took much longer than the rest – 42 minutes to be exact. Blondin took many breaks, but Colcord remained calm. Several guide lines holding the rope in place broke, but Colcord took Blondin's advice. He trusted his friend. And he followed his lead. Slow and steady they walked. And eventually, to the delight of the crowd, both men made it across. So far, so interesting. But so what? What could any of this have to do with portfolio management and investing? Well... Blondin – and, eventually, Colcord – understood that once you have a plan, you can't fight against it. You can't let emotions dictate your decision making. You have to trust the process that got you to where you are in the first place. Even Blondin, who had mastered his craft, acknowledged the importance of controlling his emotions and staying within his limits. There were limits to what he'd do out on that tightrope. There were limits to what he could do. He never allowed himself to get too greedy. He never pushed his limits too far. And when Blondin brought his manager along for the trip, he asked Colcord to trust him... even if the man resisted at first. I mention all this because, today, I'm going to ask you to do something you probably won't want to do. At first, you'll likely resist and try to overcorrect. But like the 19th-century daredevil, I'll ask that you trust me on this one. Blondin never used a safety net when he crossed the Falls. But we recently added an additional stop-loss strategy into The Wide Moat Letter. The system we had in place for selecting portfolio positions already reduces risk in a major way, lowering the chances of a stop-loss trade impacting our stock selections. When making new selections for our portfolios, we work hard to analyze company fundamentals so that we can be confident that we're buying shares at a discount to fair value. Sure, cheap stocks can always get cheaper. But it's rare for something that is already trading with a double-digit margin of safety to sell off another 30%. And thankfully, over longer periods of time, fundamentals win out over emotions. That's why we have such a high win rate at Wide Moat Research... - Fifteen out of our 17 sales (88.2%) have resulted in gains.
- And looking at our open positions, 87% of our holdings are in positive territory (35 out of 40).
We're proud of this performance. And I believe our track record speaks for itself. Readers can rest easy knowing our system for identifying quality stocks at great value works. But we're always trying to improve our strategy and systems. Moving forward, the combination of our disciplined fundamental analysis, our very risk-averse stock selection, and our new rules-based stop-loss strategy should enhance the "SWAN" (sleep better at night) nature of our portfolios. Charles Blondin never used a safety net, but we added another one for one simple reason: to help you sleep better at night. Regards, Brad Thomas with Nick Ward
Editor's note: Brad lost all his money 17 years ago. He was forced to sell his house and move in with his in-laws. But one secret helped him recover to amass a huge fortune, and also earned him a lengthy contact list of multimillionaires and billionaires... including a former president. So Brad recently stepped forward for an online presentation to share how he mastered one of the world's most valuable assets – along with his No. 1 way to invest in today. Click here to catch up on the full details... | 
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