Breadth Thrusts & Bread Crusts: Cast Iron Investing

JC Parets
July 1, 2021

From the desk of Willie Delwiche.

A strange thought occurred to me as I was cracking eggs into a well-seasoned pan over the weekend: cast iron pans and technical analysis have a lot of similarities. 

This might sound a little crazy, but the idea is worth pursuing. Bear with me while I give it a shot...

Growing up, my family didn't often use cast iron pans. They had a reputation for being hard to use. On the rare occasions that I did use one, food would burn and stick to the pan. So I was stuck with inferior results and lots of cleanup. 

We preferred Teflon-coated cookware. Teflon benefitted from great advertising and the promise of progress. They seemed miraculous at first. But the coating would chip over time and bits of it ended up in the food. Still, the cast iron went unused.

But our problems with cast iron had nothing to do with the material. It was how we were using these pans that caused our issues. We didn't understand how we needed to season a cast iron pan with oil. Also, using too much soap on clean up destroys the finish you worked to build up. 

Now I know the more a cast iron pan is properly used, the more useful it becomes.

A well-seasoned cast iron pan provides better heat and a more stick-free cooking experience than any chemically-engineered coating could ever provide. The problem isn’t the tool, but how we were using it. 

The same is true of Technical Analysis. I won't recite the whole litany of complaints about technicals when it comes to investing. You’ve probably heard them all before. A lack of understanding leads to the belief that the problem is with the approach…  

An investor tries technicals once. His results are poor. The conclusion? Technical analysis is worthless! Technicals, like cast iron pans, are maligned after poor preparation and improper use. 

The problem isn’t with Technical Analysis at all. When investors are well-prepared and understand their tools, the question shifts from "Why would I use this?" to "Why would I use anything else?"

Too many products are sold on the appeal of Teflon pans. It’s more about marketing than reality. In the real world, understanding the available tools and using them properly leads to great outcomes. 

In the kitchen, my pans are cast iron. 

In my office, I’m always watching the charts. 

 

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