Trading and Investing by Trying to Accurately Predict Economic Events Will Make You Poor
The other day, I was watching one of those economic"gurus" on youtube, who brought an interesting piece from Paul Tudor Jones. PTJ basically said, in the late 80s (or early 90s) what so many people are constantly saying now: America's debt is unsustainable, and it will go broke in the next few years (these weren't exactly his words, but the essence is that). Jim Rogers have been calling the worst crisis ever, since forever. Stanley Druckenmiller, same with a special focus on entitlements. Etc etc.
Those guys were, many still are, successful. But I would dare to say all of them would be broke if they traded on those ideas as if their lifes (and egos) depended on being right. No, in my opinion, the secret of a great trader, much more than being accurate in forecasting economic events, is: A) Understanding that even if you're right, your timing may be wrong and you can go broke on a correct idea with the wrong timing. B) Humility, humility, humility. Sometimes you're just wrong. C) The right entry, with the right instruments, where you can have the lowest possible risk for the highest possible reward, is the holy grail of trading. If you can't find it, just let it go and either wait for a better opportunity or accept you just missed it, and move on.
Thoughts?
9 Replies
And if you have the rare idea of a lifetime where you can either make a huge amount of money if you're right, or lose close to nothing if you're wrong (think Bank of England trade by Soros and Druck in the early 90s), just bet everything, and use a lot of leverage.
Forecasting is for suckers! Reacting is what is important. And being long 😀 The market historically goes up. Once again we sit at all time highs. Waiting for a "better" time is really next to impossible. DCA, stay in, buy puts if you have to but never puke and you will do well.
I wouldn't go as far as saying reactive is the way. I still think contrarian views, as long as they are taken following the longer term bias (which just as you said, is up), pays off really well and are less risky. Just buy when everyone is freaking out and panicking, do not pay attnetion to the news if you can't be an unemotional robot while doing it, and the rest of the time, just be happy.
Edit: at least that's what I'm trying to do, and I'm still having results that are not worse than the market while sleeping very well at night.
My thoughts are in order to be invested, one MUST invest.
debt servicing is indeed one of the biggest threats to the United States of America, but it is not impossible to get a handle on. those that are ringing the death knell of the US economy are merely Chicken Little's screaming 'the sky is falling'.
currently the debt is around 6%+ and that is not untenable, but what is certain is that the debt can not continue to grow at the rate in which it is running.
there are several ways to mitigate and service this issue... the biggest one is the lower the value of currency so that the debt being repaid is much cheaper than is serviced with a strong currency, Trump is already doing this... the other is grow your way out of the debt... in that it becomes a smaller percentage of GDP.
The debt is 6% of GDP now, if we can grow GDP so that the debt is 5%, you can see how this is a net positive. Trump is also doing this now.
My thoughts are in order to be invested, one MUST invest.debt servicing is indeed one of the biggest threats to the United States of America, but it is not impossible to get a handle on. those that are ringing the death knell of the US economy are merely Chicken Little's screaming 'the sky is falling'.currently the debt is around 6%+ and that is not untenable, but what is certa
Just want to mention that these percentages are not the debt, but the deficits. I get what you're saying though, thanks for posting your opinion.
Austerity is going to have to be imposed on America by the bond markets. "Growing our way out" I suspect is a ridiculous market fundamentalist idea that has nothing to do with reality. How convenient the idea gives politicians an excuse to spend more.
What we are talking about here though are decade long time frames so of course I am not trading on them. My understanding of peak Dutch guilder as reserve currency to displacement was 100 years. Peak USD appears to be the year 2000.
The internet creates much stronger ties in the network than the days of the Dutch guilder.
At 50, I just don't see any realistic alternative to US hegemony in my lifetime. I have bets on Brazil, they suck. I have bets on China, they suck. Anything involving Europe seems incredibly overpriced.
Youtube is just all nonsense and bullshit that I can't imagine any serious trader would bother with. You are just anchoring yourself to bullshit and deceptive prices.
https://en.wikipedia.org/wiki/Anchoring_...
The first line "The anchoring effect is a psychological phenomenon in which an individual's judgments or decisions are influenced by a reference point or "anchor" which can be completely irrelevant. "
More importantly though is you can't help but be anchored.
The sooner you forget financial news/youtube exists the better.
Especially Tudor Jones who I suspect goes on CNBC to create liquidity for the other side of Tudor Investment trades.
To me, he is the absolute worst.
Austerity is going to have to be imposed on America by the bond markets. "Growing our way out" I suspect is a ridiculous market fundamentalist idea that has nothing to do with reality. How convenient the idea gives politicians an excuse to spend more. What we are talking about here though are decade long time frames so of course I am not trading on them. My understanding of pea
Yeah Buy the dip 😀 We have been on a one way train since the inception of NYSE. Bad times? For sure! Fade 'em and stay long. Fade 'em and get long. Save some bullets for a dip? Sure! But get and stay long, history demands it!
Yeah Buy the dip 😀 We have been on a one way train since the inception of NYSE. Bad times? For sure! Fade 'em and stay long. Fade 'em and get long. Save some bullets for a dip? Sure! But get and stay long, history demands it!
Yes, this is the market fundamentalist perspective.
For even the most devout market fundamentalist, buying the dip is not easy in practice when the bullets are flying and the limbic system is in control.
Economics is obviously filled with ideas that have nothing do with reality.
Anyone who doesn't come to this conclusion to me has not studied the field enough.
