charleshughsmith.blogspot.com / CHARLES HUGH SMITH / JUNE 20, 2014
Timing matters, as fundamentals have no impact in a euphoric blow-off top or in a panic-driven, bidless crash.
I recently received an email from a reader suggesting I back up my opinions by publishing my own trading positions. The reader suggested that failure to put my money where my mouth is diminished the gravitas of the opinions published here.
He suggested that if I really believed in The Generational Short: Banks, Wall Street, Housing and Luxury Retail Are Doomed, I should bet against these for however long it took the trend to manifest–decades if necessary.
I understand the credibility value of putting my money where my mouth is: without some evidence that the writer is walking the walk, then we assume he/she is merely talking the talk or talking his book, i.e. supporting his positions publicly while he unloads the position in private.
There are fundamental problems with publishing one’s trading positions as a gambit for credibility, and it’s worth delineating them because they reflect the inherent uncertainties of trading and prognostication.
1. Markets do not trade on fundamentals. Though pundits and punters may refer to various fundamentals (price-earnings ratios, etc.) to justify their expectations of future stock prices, markets trade on emotions and the zeitgeist generated by Central Planning intervention, both publicly announced and secretly executed.
As a result, any analysis of fundamentals is for historical context only. Misguided attempts to predict what the market should do if fundamentals mattered rarely succeed, for the simple reason that fundamentals don’t matter. They are invoked after the fact to justify one trend or another.
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