Approach markets with a rules-based framework
The Sandbox Daily (2.13.2025)
Welcome, Sandbox friends.
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Today’s Daily discusses:
rules-based framework
Let’s dig in.
Blake
Markets in review
EQUITIES: Nasdaq 100 +1.43% | Russell 2000 +1.17% | S&P 500 +1.04% | Dow +0.77%
FIXED INCOME: Barclays Agg Bond +0.60% | High Yield +0.45% | 2yr UST 4.309% | 10yr UST 4.535%
COMMODITIES: Brent Crude -0.05% to $75.14/barrel. Gold +0.99% to $2,957.8/oz.
BITCOIN: -1.18% to $96,412
US DOLLAR INDEX: -0.78% to 107.094
CBOE TOTAL PUT/CALL RATIO: 0.85
VIX: -4.97% to 15.10
Quote of the day
“There is no greater agony than bearing an untold story inside you.”
- Maya Angelou
Rules-based framework
Here at The Sandbox Daily, a solid foundation – built on time-tested principles – is the necessary bedrock that guides my process from start to finish.
Markets are filled with noise, short-term distractions, competing interests, evolving story arcs, and conflicting signals.
Mr. Market is messy and confusing.
Mr. Market is also honest. Brutally honest. The market does not care about your opinion or how you are positioned.
Formulating a set of core beliefs for your research and investment process provides the steady framework for making decisions irrespective of emotion or market environment, helping investors stay focused on long-term objectives rather than being swayed by short-term noise. This disciplined approach fosters consistency and confidence, ensuring that each decision aligns with foundational principles and strategic goals.
Younger and/or inexperienced investors will quickly learn:
“The more you fuck around, the more you find out.” - Roger Skaer
So, here are the rules that buttress my research and investing process.
Don’t fight the Fed. Marty Zweig coined this phrase in 1970. It’s as true today as it was back then. Investors should align their overall strategy with the Federal Reserve's monetary policy direction, rather than betting against it. You may not like the Fed, you may not agree with the Fed – but don’t fight the Fed.
Don’t fight the trend or momentum of the market. Fighting the overall trend increases the probability of loss. When the market is in an uptrend, it generally signals underlying fundamental strength and investor confidence. Uptrends are when the overwhelming majority of investors need to bank their gains. A downtrend indicates the opposite: weakness and caution. Generally speaking, downtrends can be distilled down to two things: opportunity (rotate capital elsewhere to absolute or relative strength) or capital perseveration (hold on and don’t sell at the worst possible moment).
Beware of the crowd. Be cautious when market consensus is overwhelmingly one-sided. Be cautious when sentiment reaches extreme levels of optimism or pessimism.
Be objective. We all have biases. It’s important to understand what they are and how they color our thinking. Bouncing ideas off others is one antidote.
Be disciplined. Do not fight the weight of the evidence.
Be flexible. You won’t last long in this game unless you are humble. The world changes and we have to adapt to it. It’s good to question conventional wisdom and relationships, as well as consider alternative explanations. We all have egos but keeping them in check is important to investment success in the long run – nobody is right all the time.
Define your risks. It will take living through a correction or bear market to truly understand the temperature of your overall risk tolerance. On a separate note, take calculated risks. When the indicators line up, take a shot.
Study history. Those who do not study history are condemned to repeat its mistakes. It is so important to understand history and how markets have behaved in the past, and how things differ today.
Apply common sense. Keep decisions grounded in reality; a straightforward evaluation of facts is all that’s needed. Avoid the twin pitfalls of overcomplication and emotional bias. For most people, less is more.
Listen and learn from others. While this list is not in order of importance, this one should be near the top. Listening and learning from others is so crucial to your probability of success because it broadens your perspective – exposing you to different insights, experiences, and strategies that you might not have considered or known about. This will help challenge your own biases, refine your decision-making process, and ultimately make more informed and balanced choices.
I encourage everyone reading this note to write down their own list.
Putting pen to paper forces us to think through these crucial elements and better ourselves as investors for the long run.
Let me know what’s on your list. I’d love to see them. Comment below 👇.
That’s all for today.
Blake
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Welcome to The Sandbox Daily, a daily curation of relevant research at the intersection of markets, economics, and lifestyle. We are committed to delivering high-quality and timely content to help investors make sense of capital markets.
Blake Millard is the Director of Investments at Sandbox Financial Partners, a Registered Investment Advisor. All opinions expressed here are solely his opinion and do not express or reflect the opinion of Sandbox Financial Partners. This Substack channel is for informational purposes only and should not be construed as investment advice. The information and opinions provided within should not be taken as specific advice on the merits of any investment decision by the reader. Investors should conduct their own due diligence regarding the prospects of any security discussed herein based on such investors’ own review of publicly available information. Clients of Sandbox Financial Partners may maintain positions in the markets, indexes, corporations, and/or securities discussed within The Sandbox Daily. Any projections, market outlooks, or estimates stated here are forward looking statements and are inherently unreliable; they are based upon certain assumptions and should not be construed to be indicative of the actual events that will occur.
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BlueCrest Capital's billionaire hedge fund manager Michael Platt has a great quote on not fighting the trend of the market.
"The type of guy I don’t want is an analyst who has never traded—the type of person who does a calculation on a computer, figures out where a market should be, puts on a big trade, gets caught up in it, and doesn’t stop out. And the market is always wrong; he’s not. Market makers know that the market is always right. You are wrong if you are losing money for any reason at all. Market makers have that drilled into their head."