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Sunday, December 13, 2020

Be smart. Be an OTP.

Be smart. Be an OTP.

I do not know anyone in any field that is successful by doing everything.
The average hedge fund is diversified, sure, but first of all they start in 1 area then diversify by learning more and hiring people, and second they underperform, they diversify to reassure investors but this is bad. You'll sometimes see them on tv acting knowledgeable. They are not high performance athletes they are investment merchants that make money from fees their clients pay them.
The best all go to private mgmt, they manage their own money, and/or the money of a couple of high net worth individuals, sometimes of a single ultra high net worth individual.

Masters: Patient
Noobs: Chase anything that moves, you don't make money if you're not in the market duh!

It is so mind boggling to see these youtube day gamblers with their little screens with 20+ tickers on here, and switch from 1 to another.
There is a simple strategy that can be applied to all stocks but pros don't know about it, and these guys sell it for a few hundred bucks, and why do they sell it?
Well because it does not scale duh! Except it scales since they can trade all stocks with a simple rince & repeat strategy (if they can do 20 in a day it is simple),
but they are too stupid to think of scripting it and scaling to hundreds of stocks, maybe someone should tell them.
What will the next excuse be "Oh but it only works if the stock was in the news", ok then use a bot that reads the news "yes but...".

Those Robinbros & TikTokers really crack me up. A lot joined in 2019-2020. They're just so bad. You hear daily the craziest nonsense.
They just gamble on everything that moves. It's one big casino to them.

In the masters there is 1 exception that is not really one: quants. They find several strategies and scale them to as many tickers as possible, as many asset classes as they can.
But even then they are in a way OTPs. Let me explain: RenTec does incredible with the medallion fund. But their other funds are mediocre.
Hey a professional basketball player got knocked out by a youtuber recently. He is a pro athlete and would destroy him at basketball, but he is not a boxer.
Masters are specialists. Low tier novices are generalists.

We need to be smarter than the rest, we need to play on home field, we need to analyse a whole lot of info, we need to accumulate much knowledge, we need to watch our trades very carefully, this is accomplished by being a specialist, not possible to outsmart millions of people and watch baskets of eggs carefully if there are 5 baskets of 10 eggs.

Unless you cheat (insider info, front running,...) money is made by being smarter, better informed.
A childish argument made by small minds trying to look smart (professors of economics...) is that "hey everyone has access to the same info so this is why I cannot make money".
Everyone had access to the same info concerning Redemsivir. An expensive inefficient toxic garbage product. Yet many thought it would be "the cure".
2017-2019 the S&P 500 & DJIA kept going up and down "trade war hopes" and "oh no trade war escalation". And 2020 was "Covid will kill everyone and we have to shut down everything" crash followed by "cure hope" recovery.
Small minds with pompous scholar titles have said the stock market was irrational, and they came up with an excuse "well softbank whale, no one could know this".

Except we have known all along that endless hordes of individual investors were entering the market. The tik tok investor phenomenon skyrocketed.
We know these investors are not very smart. And we know when this happens, prices go up.
Even very bearish conditions will get crushed under the weight of the gigantic dumb money herd.
We also knew the FED overheated the money printer.
Somehow Nouriel the Nobel Prize at the bottom in March-April was still calling for zero haha what a guy, his specialty is posing as a scholarly authority figure, not making predictions and not making money. This guy is such a clown. Why is it the "serious people" are so often such clowns?

In hindsight it is simple. But hey I waited for a pullback and when it happened in september I bought, not hindsight.
I was not active with US indices in 2020 before that buy because it is not my specialty, just a bonus side thing.
Now there is a risk, many novices joined, I do not know if the tik tok wave is over.
US tensions are still here, now Antifa and Proud boys are regularly fighting, it's like 1931 Germany.
So perhaps after the "trade deal" era and "covid hopes" era, the next era will be civil war fud.
Yes sure right now it is taboo and "woooo the conspiracy theory" but just you wait, tomorrow it might be the new thing.

So here we are. Buy area visited.

An one trick pony yes, but one tricks can & should have a small side weapon

For my part on average I have around:
80% of my activity in Major currencies (Including the Swedish Krona & Chinese Yuan - offshore Renminbi)
15% of my activity in CME commodities ( Oil , Gold , Copper , Grains)
5% in other areas, it is really tiny (US & EU indices, Bitcoin )

I am not ultra familiar with what I trade, it's not like a second nature, but I am familiar enough to be very comfortable and knowing most of the ins & outs, I do not have to ask myself all sorts of questions when I look at one of my charts. And of course, I don't trade them all at the same time.
In October and November 1/3 of my trades concerned the AUD. 20% were NZD trades. And it's all the same 2 strategies over and over.

If I could only trade Forex I would do great. The rest is extra. And if FX got banned (because so many retail investors lose, because of a new Bretton Woods), I could bounce back, I would not do great but I'd have something to play with, I would try to expand how many commodities I trade, but I would not start from zero, I would have to learn new futures (that I already know a bit about) while resting on a solid (not exceptional but solid) base made up of Gold Oil Copper , in an area I am moderately familiar with.

My favorite thing is to be an OTP with 1 "champion" that you play over and over and over, but with a secondary champion that you are decent with.

I repeat: Novices and eternal losers are jacks of all trades. Winners are one tricks.

When we look at the 2 extremes of the investing world we see on one side the novice, the absolute noob, that is a jack of all trades master of none, they know nothing about trading (they think they do), they get bored quickly by 1 stock or crypto then jump to another, they keep jumping around, they trade so many different things, the worse (and funniest) extreme fail example is when they know NOTHING about futures and see $1 Oil then somehow their ego is so big they think there is an incredible opportunity but no one noticed it's just them, and so they buy, and then the price falls to -40 and they lose 5000% of their money; and on the other side you find experts that only trade 1 thing, some of those may be lucky ( gold millionaires), but there is quite a trend with OTPs that get successful.

The more you go towards novices the more you will see huge "diversification", the more you look at professionals the more narrow it gets, with billionaires (not just BRK ) that are happy with 2-3 stocks. Honestly, how is it possible to be a crypto investor since 2015 and STILL BE BROKE!
These clowns are bad and they have no clue what they are doing, AND they hop around different cryptos over and over.

Which reminds me of something. Warren Buffett said "put all your eggs in the same basket and watch it closely", and don't touch it.
Of course lazy get rich quick investors turned that into "buy and forget".
Are any of those pilots? Imagine. Take off, then direct the plane towards the destination, then go play the PS5. "Ye just take off and forget".
A pilot isn't changing direction all the time, but he is watching closely instruments, and correcting if need be.
Bad investors either don't watch at all and then it is gambling and a terrible pilot, or they watch closely and change direction all the time and do freaking loopings and panic when the passengers knock at the door until they just jump with a parachute (or without sometimes "oh no my wife is going to kill me").

Successful people:
- Are specialists
- Learn everything there is to know about their specific subject and surrounding ones
- Practice their subject over and over and over and over all week long for years.
- Often have a secondary activity (5 to 25% of main)
- Know everything about the 1 thing, but also know a little about everything (in the periphery)

Armies have a selection process for basic soldiers. They have (had) to survive "shark" attacks and they must be smart enough and able to perform certain fitness tasks.
Snipers are specialized expert riflemen of sufficient rank that have several qualities, go through rigorous training and pass excellence tests.
According to figures released by the US Department of Defense, the average number of rounds expended in Vietnam to kill one enemy soldier with the average grunt M-16 was 50,000. The average number of rounds expended by U.S. military snipers to kill one enemy soldier was 1.3 rounds. That's a cost difference of $23,000 per kill for the average soldier, vs. $0.17 per kill for the military sniper. Yes the M-16 includes suppressive fire and everything but still.

Snipers have 1 job. And that's all they do. You won't see them get to the location, and once here you won't see them you won't hear them you won't smell them. They'll prepare and they will wait for as long as it will take.
But snipers learn and have skill about more than just 1 thing than just aiming and shooting, first of all they went through basic training duh, and they know a great deal about camouflage, about idk breathing, about weapons, about aiming, moving silently, exiting after taking the shot, and more (like FX traders kind of look at every other asset and not just central bank press releases and the 3 month chart but everything: other currency pair charts, various timeframes, the things everyone else looks at which is US elections and covid, other asset classes, and so on).

The typical Tik Tok investor will tell you "this has nothing to do with...". Remember the scene in starship troopers? "Sir, I don't understand. What good's a knife in a nuke fight? All you have to do is press a button, sir.". "Put your hand on that wall, trooper.". He sure learned his lesson. Novice investors... Always trying to make it as easy as lazy as possible, and always chasing anything that moves.

Those reasons are why you should be smart and be an OTP.

from Trading Ideas
via gqrds

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