Opinions and predictions are cheap. Trust only those who back it up hard with their own capital.
I often get asked the question “Are we due for another GFC correction soon?“. In almost all cases, I give this humble answer:
I don’t predict, I just prepare for the scenarios, from good to worse. Why? Because I genuinely admit that I have absolutely no idea and I don’t need to.
I just form opinions based on the raw data I see and do my best to interpret that into a framework that makes sense enough to take action and hopefully profit from, for my loyal investors and myself.
“You do not need to predict the market’s direction to make money consistently”. (I know I will probably get some flack for this blanket statement)
If the best on the planet only get at most two-thirds of their trades right, why then do I and others think we can get all of them right? The probability is literally ZERO.
Everyone seems to love predictions. We are glued to every word economists on TV say. I am intrigued with this human behaviour because one forgets that most predictions are simply one’s own guestimate and perception of events as they see it without any of their own risk capital riding on what they say.
I do wonder what one who makes predictions everyday would really say if they had to back up every prediction/idea of theirs with at least their full months salary? I bet their myriad of opinions and predictions wouldn’t be so forth coming and probably decrease dramatically. After all, you only really need to get a few right out of the many wrong (which no one seems to takes notice of and forgets) on TV to become a celebrity rock star.
However, there is a very small minority group of passionate economists who do seem to get the bulk of their predictions quite close to the mark. It is these passionate ones who you need to find.
As I see from the latest raw data out of the US (don’t worry as I won’t bore you with the numbers and stats), things are humming along. I ‘think’ we may be due for a short term pull back due to the recent market strength as it always reverts to equilibirum in the short term and as such I have liquidated well over 90% of our short/medium term trade positions at good profits (which is abnormal I must say in terms of long term win rate. We usually sit at the long term 75-85% win rate)
So in my opinion the US economy as a whole is buzzing along nicely and supporting global growth and balancing out the negative basket case of Europe and slow down of China.
Thus, we continue to hold onto our long term investments which we have been able to buy cheaply in the past and will continually collect great global franchises at the right price when they are made available during periods of panic selling.
There will always be some bad news somewhere around the world and the troubling one or two sectors at any point in time like the energy and raw material producers and their respective service providers as of late. But one must not forget that cheap oil prices as well cheap raw materials benefits the companies and industries which are heavy end users ie. transport and industrial manufacturers. I’ve even personally enjoyed the cheap gasoline prices at the pump and now don’t mind filling up my car every week.
Why not then be a contrarian and run against the crowd? It is very profitable doing so. I do and hopefully you will too.
If you like this post, can you do me a favour and click the ‘Like’ and ‘Share’ buttons to spread the message!