I just read a piece from a technical analyst (chart and number stuff) where she was pointing out how such and such was bullish while such and such was bearish - you know the old economist type commentary of “on the one hand, but on the other”. While it all sounds quite interesting and educated, I find myself asking “why she is doing this”?
That answer is really very simple – she’s trying to make money. She’s doing this by attempting to compare the line-up of certain statistics today with some past line-up, and base today’s action on what happened after that previous line-up. I wonder what the odds are that she will be correct? That’s the question! I can’t tell you how many times, over all the years,” that I’ve seen these proclaimed set-ups turn out differently than the writer’s prediction.
I guess if you are constantly making calls, some will be right and some will be wrong. If you are able to sway the odds just a few percentage points over 50 in your favor, you’d be surprised how well it works out over time. Just like the casinos. The odds are only slightly in their favor, but if you play their games constantly, you will eventually lose all your money.
It reminds me of the recent story of a former mayor who took money from her husband’s charity over 8 years and proceeded to lose $10 million playing video poker. She bet over $1 billion during that period but those odds – well you know the outcome. I find this very fascinating--how an intelligent person can play a game with fixed losing odds yet convince themselves that they have a chance to win. I know – it’s an addiction. But she didn’t even attempt one of the numerous ploys in a game like Blackjack, such as card counting. At least there you are attempting to swing those odds that few percentage points. But video poker?? No way!
Which brings me back to the premise of this digression. Embrace the Casino! I’ve talked about this many times. Life’s a casino and so are investments. All of them. As I write this, I have CNBC in the background and I’m hearing snippets of conversations. One guy is trying to convince the other that his “fundamental” analysis is scientific and a better way to go – my take is fundamental analysis, like every other type of analysis, is just a way to give you bravado in making your bet – and both guys are using words “betting with the Fed” and “making a gamble”. They are using Casino and gambling terminology for what investing truly is. That’s why they use those terms. But attempting to make it seem legitimate and tame is where the falsities lie – and it’s why people are scared of the market, and why they should be.
The good news is that when you embrace the casino, there are a lot of ways to either play along or control the odds somewhat. You can bring way down the odds of adverse outcomes if you choose. When you understand that no one knows what the real outcome will be, no matter how eruditely or vehemently it is espoused, you can then position your wealth best for you.