This is an ET Professional note, and for the next few days we’re making it available to everyo
Wage Growth, Groucho Marx Edition
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Thanks for sharing this Ben. As a “premium” subscriber considering the upgrade to “Pro”, you hit on my exact issue in your conclusion. I can’t bring myself to base my investment decisions on the momentum of what I consider to be false cartoons. I don’t think that I could ever get my heart into it.
Can we make money by betting against cartoons that are a) false b) driving prices in a meaningful way and c) running out of steam? In other words, objective reality as gravity and crumbling narrative as a catalyst. Presumably the inverse (new narrative that is “true to reality” and gaining momentum) could also work. I know that this approach would reduce the opportunity set, but at least I would be able to respect my process and “serve my pack” with “clear eyes and a full heart.”
I think the way to invest in a Clear Eyes and narrative-aware way is this:
base your investments on a real-world view, because that’s the only investment that a real-person can stick with.
start buying when the narrative is against you … not all at once, because the narrative can always go MORE against you … but this is when you start to buy.
accelerate your buying when you see the narrative start to shift your way … this “discovery” phase is where you will make most of your money.
start selling when the narrative is with you … not all at once, because the narrative can always go MORE with you … but this is when you start to sell.
accelerate your selling when you see the narrative start to shift against you … this “Thermidorean” phase is where you can lose your nerve.
Wash, rinse, repeat. Like England, you have no permanent allies (or investments); you only have permanent interests.
Ben this may be the clearest and best investment “advice” I’ve ever read. And it’s also why I think a sell-discipline based on strict, conservative price targets will leave money on the table as often (if not more often) than it will prevent big losses.