Sam Seiden
Independent Analyst
Walmart, Tesco, Costco, Sam’s Club just to name a few, these are some of the biggest retailers in the world; huge operations that make fortunes in revenue. How do they do it? What is their big secret? Simple, at the end of the day they have simply mastered the skill of buying at wholesale prices and selling at retail prices. Wait, this is supposed to be an article on investing so why write about the retail world of gadgets, clothes, appliances, toilet paper and more? It’s an important topic if you want to understand how to be a successful investor. When you look at the buying and selling actions of the major retailers in the markets they operate in, they are no different than the actions of the successful investor. So, if you’re looking for more income or wealth and thinking of starting a retail business, you may want to think again and consider a path that may be much easier. The difference is that the average investor can do all this from the comforts of their own home.
Let’s get more specific with these actions so that you can become a better investor by the end of this article. For Walmart to profit they have to make sure that there are many willing buyers to pay the retail prices they are charging. When we invest, we must do exactly the same thing. We need retail buyers who are willing to buy at the retail (supply) price levels we are charging when taking profit on an investment that we bought, whether it be an up or a downside move in the market. Take the example below from a recent opportunity found using the Daily Market Overview, one of our daily services for members. In the session, our XLT instructor identified a supply level in the oil market. This is a price level that, according to our rule based analysis, had much more willing supply than demand. Another word for a supply level is “retail.” Next, price rallied up to our pre-determined supply (retail) level which means people were convinced that oil was worth buying at our retail price. After they bought, price declined as it should and we were able to buy lower, profiting from this move.
Again, this is really no different from paying extreme retail prices for a new car. As soon as you sign the papers and drive it off the lot the price declines dramatically. The first step in this process is to accurately identify key supply (retail) prices in a market. The second step is to wait for someone to buy from you at that level. Just like people walk into Walmart each day and pay retail prices; people will be more than willing to pay your retail prices in the markets. This is because most people buy on good news and in strong up trends. In both cases, they are typically buying at or near retail prices.
Oil Market – April 21st, 2015
Take a good look at the chart and specifically at the supply level and then the rally into it followed by the decline. That picture is the same picture of price movement if you were to buy something at Walmart and then try to sell it at a garage sale at your home. You are going to sell it for a much lower price than you bought it for at the store. Whether we are talking the oil Market or a Walmart product, the chart is identical. Just like the retail store, you must know what retail price to sell at (supply levels) and you must have the patience and discipline to wait for someone to be willing to buy at that level.
You really do have your own retail business going at your home if you think about it. Smart investors know price levels that are too low (demand/wholesale) and price levels that are too high (supply/retail). They buy at wholesale prices from people who are conditioned and willing to sell at wholesale prices. They also sell at retail prices to buyers who are conditioned and willing to buy at retail prices. Then, they just repeat the same simple process over and over for their entire life. Those who pay retail prices in the markets create wealth for Wall Street. Those who pay wholesale prices create wealth for themselves. Another way to say that: Some people create their own pension from the financial system; others create it for Wall Street. Who are you?
Hope this was helpful, have a great day.
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Editors’ Picks
EUR/USD stays well offered below 1.1800
The selling pressure on EUR/USD is picking up pace, with the pair slipping decisively below the key 1.1800 level and sliding to fresh two week lows as Wednesday’s session draws to a close. The move lower comes as the US Dollar finds renewed strength after the latest round of US data and the release of the FOMC Minutes. Next of note on the docket will be the US weekly Initial Jobless Claims.
GBP/USD reaches multi-day lows near 1.3500
GBP/USD reverses its initial upside momentum and is now adding to previous declines, approaching the 1.3500 region on Wednesday. Cable’s downtick comes on the back of decent gains in the Greenback and easing UK inflation figures, which seem to have reinforced the case for a BoE rate cut in March.
USD/JPY holds gains near 154.00 ahead of the Fed’s minutes
USD/JPY retraces Tuesday's losses and returns near weekly highs in the area of 154.00. The US Dollar trims losses in quiet markets with all eyes on the Fed's minutes. Weak Japanese GDP data resurfaced concerns about Japan's fiscal stability and halted JPY's recovery.
Editors’ Picks
AUD/USD: Further weakness could retest 0.7000
AUD/USD resumes its decline, leaving behind two daily gains in a row and approaching the area of multi-day lows in the 0.7040-0.7030 band ahead of the opening bell in Asia. Moving forward, the Aussie is expected to remain under scrutiny in light of the publication of the jobs report in Australia.
EUR/USD stays well offered below 1.1800
The selling pressure on EUR/USD is picking up pace, with the pair slipping decisively below the key 1.1800 level and sliding to fresh two week lows as Wednesday’s session draws to a close. The move lower comes as the US Dollar finds renewed strength after the latest round of US data and the release of the FOMC Minutes. Next of note on the docket will be the US weekly Initial Jobless Claims.
Gold battle to regain $5,000 continues
Gold is back on the front foot on Wednesday, shaking off part of the early week softness and challenging two-day highs near the $5,000 mark per troy ounce. The move comes ahead of the FOMC Minutes and is unfolding despite an intense rebound in the US Dollar.
Australia unemployment rate set to edge up within overall strong labor market
The Australian monthly employment report is scheduled for release on Thursday at 00:30 GMT, and market participants anticipate a modest increase in jobs in January. The Australian Bureau of Statistics is expected to announce that the country added 20K new jobs in the month, while the Unemployment Rate is forecast at 4.2%, up from the 4.1% posted in December.
Mixed UK inflation data no gamechanger for the Bank of England
Food inflation plunged in January, but service sector price pressure is proving stickier. We continue to expect Bank of England rate cuts in March and June. The latest UK inflation read is a mixed bag for the Bank of England, but we doubt it drastically changes the odds of a March rate cut.
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