It’s Not Happening

I apologize for my lack of regular posting over the past thirty-six hours, as I was attending to some personal business. As an aside, note that even when I take unannounced leaves of absences, I still post more then 99% of the bloggers on third-tier sites. Indeud.

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One of the reasons why I have supreme confidence in my trading style is because I know my limitations. I am fully aware of two things that are extremely difficult for many traders to admit:

1. Trading is, in fact, gambling. If you are a regular reader of mine, then you have read this before. Simply put, we traders are wagering money on outcomes that have yet to be determined. Rather than stubbornly arguing that we absolutely MUST make money on a trade because our given thesis is so strong, a better approach is to recognize that luck is most certainly a factor in our success. Nonetheless, luck is the enemy of the professional trader. We are constantly doing things to minimize luck (cutting losses, taking profits, selectively picking trading ideas, refraining from outrageous earnings gambles, etc…), whereas novices are actually relying on luck to bail them out of mistakes, such as going all-in on a stock before earnings.
2. Technical analysis can only go so far. Anyone who argues that expert chartists are omniscient regarding the market is a fool. Price action and volume can only go so far as to illustrate the market’s best hunch about everything that is currently known and knowable. Nothing more, nothing less.

Because I can admit to the two points above, I find it increasingly laughable to hear audacious calls by bears who have been consistently wrong since we hit 1040 on the S&P 500 last August. They insist we will revisit the lows of March of 2009, yet they admit to no wrongdoing. Their macro thesis goes something like this: “Things are bad, and they have not gotten much better in the broad economy. Therefore, if you go long stocks, even for a trade, you will be the sucker who winds up holding the bag when the market rolls over.”

Should we actually fall apart and head down to 666 on the S&P, there will be plenty of warning signs, such as heavy selling volume, charts topping out followed by confirmed breakdowns, as well as an overall unhealthy market. If and when that time comes, I will be more than happy to do an about-face and join the bears.

However, until then, you sir, are an ignoramus. You have been wrong, and you will likely continue to be wrong in your choice to make trades based on a macro thesis of which the market is already fully aware. When $LVS went from $147/share to $1.38/share during 2007-2009, that was not the market pricing in a few less bachelor parties taking place in Las Vegas. No, that was the market pricing in a deep depression on the Las Vegas Strip not just for one year, but a few years out.  Don’t believe me? How hypocritical are you?! You are the same bearshitter who argued that the Nasdaq bubble in 2000 was pricing in years, if not decades, of amazing technology growth. Have some pride and be consistent in your arguments.

The bottom line is this: Your macro investing style, bullish or bearish, has likely already been discounted by the market. Even if it has not, you could easily be wiped out before your thesis comes to fruition (think about how many smart guys got squeezed in the housing run up until 2005-2006). The market can remain irrational longer than you can cherry-pick facts that support your bias.

In poker, it is often said that if something is not happening at the poker table, then it’s not happening at all. In other words, who really cares about something that takes your focus off of being the best poker player that you can be, dealt hand after dealt hand? The same applies to the stock market. If your bearish thesis is not happening now, then it’s simply not happening. Disregard that fact at your own portfolio balance’s peril.

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