It feels soooo good to be vindicated, even if it is just a partial vindication, especially coming from an onslaught of skepticism. Partial because I can be temporarily right today but risks from an adversarial outcome especially from a shock may overwhelm us again. But so far, so good.
Yes, the most difficult part from a contrarian perspective is to be unpopular. Since our insights deal with independent systemic based analysis than from outright simplification of the causality variables as espoused by almost a majority in our field, our ideas tend to be ignored. People like to be told stories that are easy to comprehend or easy to visualize or tales that attached to present prominent events or if we quote Bill Bonner of the Agora Publishing fame, ``People come to believe what they must believe when they must believe it.”
Since we don’t sell anything to anybody, my goal has always been to be as objective as possible, even if it comes at a cost of non-patronage. Sometimes in soliciting our advice, some may have probably felt offended when we dealt them the glacial realities from the functionalities of marketplace, but overtime I hope they come to realize that what we told was for their own good. Sorry it is not my role to confirm your biases.
As a student of the market we try to learn from the deeds of those whom have succeeded in the field and so attempted to assimilate the same traits tailored in accordance to one’s personality.
And as an example of such traits, we learned that independent thinking is crucial to long term investment success, so in adherence to Mr. Warren Buffett’s words of wisdom, ``You can't do well in investments unless you think independently. And the truth is, you're neither right nor wrong because people agree with you. You're right because your facts and your reasoning are right. In the end, that's all that counts. And there wasn't any question about the facts or reasoning being correct.”
Nevertheless, we don’t pretend to know everything, nor do we pretend to pinpoint the exactitudes of peaks and troughs of markets. In the years of learning, it has been a painful realization that trying to engage in market timing is almost like playing a game of vanity. Yes, at times, it comes with accompanying thrills alright; insider treats, forum whispers, support-resistance trade and gossip mongering does add up to the adrenalin. And when the tide turns in our favor we feel infallible or overconfident, never realizing that the rising tide allowed us to benefit than from what we assumed as our inherent “skills”.
But once the tide has turned against us, the pain of losses is almost always greater than the short term successes. We tend to get consumed by regrets, and worst, pass the blame on others instead of admitting and learning from our mistakes.
Besides, in contrast to the simplistic notion that financial market investments is a no-risk, no-failure model is likewise delusional. Some people think that success in the marketplace requires a magic wand. Some people think that the function of analyst is to be a soothsayer or astrologer. This is a no-no or a disconnect from reality.
Exposure in the capital markets always entail risk taking. The truth is we can’t grow trees from the sky. Maybe if you are in the government, but not in the markets. Since we can’t exactly predict tomorrow, we will have to learn how to face the hard facts and correspondingly deal with the risks with appropriate action when conditions so require.
Thus, from the understanding of the cyclicality of the markets we can use our best guessestimates on the whereabouts of the phases of the cycle. Since we lack the market sophistication tools for hedging, from here we can work with what we have by balancing our portfolio in accordance to the risk environment and to one’s risk profile. In short, we get ourselves exposed to the market in the degree where we can have a good night sleep regardless of the daily fluctuations.
Remember, we can’t get married to the market too. We will have to understand that market returns always reflect a tradeoff between risk and returns. The mainstream or my counterparts rarely touches on these aspects. That’s why horse racing sells, you are trained to look at gains and ignore losses. In other words, we learned that investment success has the golden rule-to know your risk. So before putting money in the any endeavor always know how much risk you can afford to take and position accordingly.
We will have to always keep ourselves open to the diversity in opinion or perspectives since it is one way to extract or collapse built in complacencies or biases. Since the market is a channel of exchange thus it is always about diversity-that’s how transactions get consummated. Buyers need sellers in as much as sellers need buyers. That’s the beauty of the market, satisfaction is usually attained by virtue of exchanges.
Finally, understanding the thought process is also another very important factor for us. That is why it has been an obsession for us to study the behavioral framework in terms of finance or economics. From Bernard Baruch (1870-1965), Financer, Speculator Statesman and Presidential Adviser, ``“Only as you do know yourself can your brain serve you as a sharp and efficient tool. Know your own failings, passions and prejudices so you can separate them from what you see.”