Friday, January 16, 2015

The Man In The Mirror

Mailbox
Question

Eric, having been burnt by the excitable gold crowd, I'm trying a new approach that hopefully is objective enough that my results will be better. Along that line, do you give any credence to the thought that there could be a black swan (such as the swissy) that could pop up and instigate a rich into gold, that wouldn't be reflected in the capital flows you monitor? OR is it your assumption that, like charting purists, nothing happens without the market knowing (and showing ahead of time if one knows why to watch.

Thanks in advance

Bill

Answer

My nearly twenty years of trading experience has taught me that investment strategy is comparable to playing multiple games of chess while juggling hand grenades. This game usually ends in disaster solely based on the man in the mirror.

Computer analysis of capital and leverage money, either through mathematical discipline or artificial intelligence (AI) is the only method that smashes the mirror, thus, eliminating bias and opinion.

The invisible hand, the self interest of all investors, drives capital flows. Capital flows follow cycles and oscillate between the extremes of money and human behavior.  The only constant observation throughout time is change.  Scholars such as Aristotle, Plato, and even Thomas Jefferson observed this tendency in their writings.  For example, tree of liberty must be refreshed from time to time by the blood of patriots and tyrants illustrates this point.

Trend in the Euro, US dollar, Swiss Franc, Yen, and soon gold suggests another black swan, highly overused word, is inevitable.  Those that follow the message of the market, either my website, similar, or even better through independent thinking, are anticipating tomorrow's black swan(s) as I write. These positions will be reversed only when the public, generally a day late and a dollar short, recognizes them as a threat.

A panic is coming.  The public, generally oblivious to the rising risks communicated by the markets, will be the bagholders of the next crisis.

Hope this enhances your new approaching to thinking about the markets.



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