This is my WTF moment for this week – possibly this year. Did you know that in Arizona it is illegal to massage a horse without a licence.We are talking about therapeutic massage here, not the you have been out on the trail too long and that filly looks mighty fetching in this light. Interestingly, there is no restriction in Arizona on buying or carrying assault weapons and people wonder why the US is a f#4cked up place.
I know I should not be amazed at the limited grasp of market reality that afflicts both financial journalists and fund managers but this one is a corker.
“Given a five-year bull run it is impossible to argue stocks look cheap, but the market is not necessarily too high,” MLC Investment Management senior investment consultant Brian Parker said.
What market are you looking at sport? The All Ordinaries has gone sideways for since the GFC and has only shown any sort of trend since July2012 and even that has occurred in fits and starts. It is any wonder that 99% of all fund managers under perform the major benchmark indices when they cannot even identify what a trend is.
To give you some idea of what a five year bull market actually looks like here is the All performance compared to that of the S&P500
I was cleaning out some old stuff of mine after finally getting the painters out of my house and I came across an old battered and weathered t-shirt of mine that had the following kanji characters written on it.
For those whose Japanese is a little rusty it breaks down to the expression Osu. Osu is a contraction of the characters Oshi meaning push and Shinobu meaning to persevere or endure. If you were to string the words into a form that is comfortable to us English speakers it would literally means to endure or persevere under pressure. The contraction of Osu is often heard in dojos as an acknowledgement of an instruction or command. It is used instead of yes or no since it conveys not only a the acknowledgement but also something deeper You are telling someone that you will persevere.
For me it is one of those phrases you hear in another language that whilst having no real direct translation into English conveys an enormous amount in terms of shared experience. If I said Osu to someone with the same background as mine we would instantly share a serious memories which whilst distinct and idiosyncratic are nonetheless shared.
Coincidentally, we have reached one of the first landmarks in the Mentor Program where perseverance is required and where people begin to drop off because they realise there is work involved and that they will not be given a magic system that will turn them into trading gods. Interestingly, this is most peoples approch to life – their interest and motivation lasts a few weeks and then once they realise that a commitment is needed they lose interest.
In my mind success in anything is about simply grinding it out or as the Japanese would say Ishi no ue ni mo sannen or three years on a rock. The problem is most people want a simple 12 week on a rock program at the end of which they get a certificate.
Whenever, you take a position in a given instrument you are by definition doing something that is different from someone else in the same circumstances. Consider the chart below of Apple.
I could make the compelling case that the stock has broken out. It has made a new high, broken out of resistance and has done so on increasing volume. So my decision would be to buy the stock seems logical and inevitable. However, the person selling the stock to me has a different view. Something has compelled them to act in the exact opposite manner to me. I could rationalise their decision in any number of ways. They could have other commitments to meet, they may have entered the stock at $225 and be profit taking or I could simply regard them as being stupid.
Irrespective of their reasoning, they have taken an action that is different to mine. Their would view is different to mine and they have acted according to that world view. When looking at individual trades it is worth looking at it through the eyes of someone else since this enables you to understand and plan for all eventualities. Unfortunately, as traders we often focus on the binary outcome of each individual trade and then discount what may come after that. This discounting of what may come next in some instances leads to us simply hopping from one position to the next without any form of cohesive narrative behind what we are doing.
The video below is related to this notion of different ways of solving problem and shows how a different world view can be used to solve a given problem.
Humans by and large are appalling natural statisticians, we continually misunderstand the risk of certain events occurring. I have friends who wont swim at the beach because they are frightened of sharks by will drive for two hours to get to the beach and then sit on the sand.
My friend and uber money manager is on this weeks episode. Click here to listen