Jul

24

The Bears, from Ed Stewart

July 24, 2015 |

 I was recently referred to the David Stockman's blog, and after reading a few articles was nearly wetting my pants in fear. The fear brought to mind an occasion, a dark, dark memory, of a time I almost blew up my account(s), shorting SP futures just as my son was a few months from being born, one of the darkest periods of my life. And while I had some numbers I was going on, the over leveraging and stubbornness that set in was based subconsciously on the rantings of people like Stockman.

I came to the conclusion that libertarianism, or listening to libertarians is one of the most dangerous investment afflictions around, I disavowed any belief that this perspective that could help me make money, and it seems I have been cured for 6 years. I'm still sympathetic to the position philosophically, but have learned to ignore the market based rantings that I had ignorantly begun to factor into my world view.

I've not done any significantly leveraged short trades since that time. If the crash comes I'm happy to miss the "upside" of that event, play the swings, and hopefully position for the next upside with surplus in high return on invested capital stocks, hopefully be positioned to short some premium, but as for rooting for the crash, "chickens come home to roost" and all that, count me out. I could care less about the opinions, even if on a 100 year time horizon (perhaps) they will be proven true.

Victor Niederhoffer writes: 

Mr. Stockman came to the junta and called for Dow 10,000 a year ago, and said to hide your money in mattress as banks are not safe also. I felt compelled to counter his views with data based on interest rate versus return on capital, and a buy and hold return of 40,000 fold a century. It occurred to me that my approach is somewhat Malthusian. Earnings grow by a compounded rate based on the return on capital. This trumps algebraic opportunity costs and interest rates.

Anatoly Veltman writes: 

Of course what can't be historically tested is next year's stocks profitability following a 35-year fixed income rally. That means that no history is helpful to one's S&P positioning today.

Gary Rogan adds: 

Why does this situation have to be viewed in terms of the trend that led here as opposed to the set of numbers that exist today regardless of the path to the present?


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2 Comments so far

  1. Avery on July 26, 2015 4:29 am

    ‘libertarians’?

  2. manav on July 28, 2015 12:44 am

    The only value to these sort of extreme forecasts comes when they go mainstream - which can by definition only be true at the times of maximum greed or fear - typically great contra opportunities

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