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Fortune Favors the Prepared

Posted January 18, 2022

On January 17, 1781, the Battle of Cowpens changed the history of the world. The setting was South Carolina. The British had landed in force in the South in an attempt to rally Loyalists and bring a final end to the Revolutionary War. It was a turning point.

The redcoats, under the aggressive 26-year-old Lt. Col. Banastre Tarleton, had the Continentals and militia backed up six miles from an overflowing waterway named the Broad River in a large meadow called the Cowpens.

American Brig. Gen. Daniel Morgan, knowing Tarleton, expected a frontal assault and set his defense in three lines, 150 yards apart. The first line was composed of sharpshooters who hid behind trees and killed the British dragoons before retreating behind the second line of the militia.

The militia was a backwoods group of undisciplined patriots who had a habit of running away when confronted with the fearsome sight of a British bayonet charge. Morgan asked them to fire just two volleys before fleeing behind the third line of disciplined Continentals.

Tarleton didn’t disappoint. Thinking he had the rebels trapped and that the rolling grassland favored his way of fighting, he launched an immediate attack.

The snipers took their toll. The British advanced. The militia fired their volleys and quickly retreated. This convinced the British a rout was on, and the dragoons chased the rebels pell-mell over the grassy field.

They were then met by the third line, which held strong and fired a volley. Then the American cavalry charged from the flank.

The end result was an overwhelming victory for the Americans. Over 110 British were killed, with 200 wounded and 500 taken prisoner, versus 12 killed and 60 wounded on the rebel side.

Tarleton made his escape and told the tale to Gen. Cornwallis.

With the main British army, Cornwallis chased Morgan north, burning his supply wagons in exchange for speed.

Many months, miles, and battles later, the British general found himself holed up in Yorktown on the Virginia Peninsula, running low on food and ammunition and with resupply cut off by the French fleet. On October 19, 1781, Cornwallis surrendered to Gen. George Washington, effectively ending the American War of Independence.

Market Value

What does this have to do with the stock market, you may ask? Well, maybe something or perhaps nothing at all, but it does speak to the human condition.

Many people would value a stock market with ratios that tell you how many times earnings, sales, or cash flow a stock goes for. Or perhaps they use balance sheets, debt, and growth. There are candlestick charts and patterns like double bottoms, trend lines, and moving averages.

But none of these is what really matters. It is human psychology, aggression, and conservation that move markets — so-called fear and greed.

For the past two years, greed has been winning the day. Like Tarleton, who knew that aggression led to victory, Cathie Wood of ARK Innovation has been the talk of the town.

In 2020, she beat the heck out of the market by aggressively buying Tesla (NASDAQ: TSLA), Roku (NASDAQ: ROKU), and Teladoc (NYSE: TDOC) among other momentum stocks.

ARKK Chart

Since then, her ARK Innovation ETF (ARKK) has given up half its gains.

It went from beating the market with authority to not beating the market at all.

It is one thing to be bold and another to know when to be bold.

All the best,

Christian DeHaemer Signature

Christian DeHaemer

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Since 1995, Christian DeHaemer has specialized in frontier market opportunities. He has traveled extensively and invested in places as varied as Cuba, Mongolia, and Kenya. Chris believes the best way to make money is to get there first with the most. Christian is the founder of Bull and Bust Report and an editor at Energy and Capital. For more on Christian, see his editor's page.

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