Archives of “misunderstanding” tag

rss

Trends- Reversals- Cycles

  
  Education
#  #  #  #  #  #  #  #  #  #  #  #  #

Many assume the continuation of trends beyond their turning points. Such thinking is evident in the news. The opposite view is the statistical lack of trends and the assumption of reversion to the mean. However trends exist in a random or due to macro effect such as government (mis)policy or herding, none of which can be ignored except to one’s detriment. The pure quantification of price makes discernment of the change of cycles hard to see except in retrospect, thus other forward and current input seem worthy to consider. There are tells to macro effects if they can be discerned. The random trends also may have their characteristics. Philosophers like to define their terms, and traders also need to define their time frames to clearly state the issues. This seems to be a common point of misunderstanding in debates on these issues.

 

The Secret Sauce: A Knowledge Advantage

  
  Education
#  #  #  #  #  #  #  #  #  #  #  #  #  #  #  #  #  #  #

“What is your secret sauce?

Click here to find out more!

No. 1, it’s possible, especially in inefficient markets, to gain a knowledge advantage. By definition, an inefficient market is one where hard work and skill can pay off. We can also control our psyche and emotions so that we don’t make the human mistakes that are so common. Of course the other thing is we have a philosophy of controlling risk. So that doesn’t necessarily make us the winner rather than the loser in the transaction, but it increases the probability that we engage in transactions of the sort that we and our clients want.”

There are a few ways to access better knowledge in an inefficient market.  You either have better sources, illegal information or you just simply have a superior understanding.  That’s why I always emphasize the importance of a sound top-down approach.  If you don’t understand the monetary system you’re more inclined to make mistakes in micro managing your portfolio.  You make silly mistakes like misunderstanding how the Fed operates, how QE works, how fiscal policy impacts the economy, how bond auctions works, etc etc. Misunderstanding these important macro functions has resulted in endless predictions for hyperinflation, rising bond yields, falling stock prices, etc.  But if you had a sound understanding of the system – if you had a better understanding – you sidestepped all of these predictions that were clearly wrong if you understood how the system works.

You don’t need to cheat or steal to get better information or knowledge.  Sometimes it’s a matter of putting in the effort to obtain it.

Go to top