In what can only be described as an interesting turn of events on Wall Street, anything that has been obvious past July of this year has turned into a bonanza of profits for investors.
The less experienced the investor, the more probability of an extreme bonanza of profits, as inexperience has continually beat anything resembling market savvy.
The more obvious the opportunity, the greater the upside.
It is all around us. The markets have become a Chinese buffet with all types of deliciousness for anyone who walks through the front door.
You will have a population of investors and traders who will refuse to participate in such circumstances, as they realize how all of this ends. That hardened type of belief, resulting in stubbornness of action is, however, a handicap in such an environment.
While these contrarian pessimists are right in their analysis of blood and gore, with the splattered brains of once virile bulls being the eventual outcome of all this, the old saying that "the markets can remain irrational longer than one can remain solvent" can come in handy here.
We are in the midst of irrationality, without a doubt. However, at the same time, that very same irrationality is all around us, not just in the markets, but in governments, populations and a culture that now sees fiscal stimulus a birthright.
That combination of seemingly irrational fiscal and monetary stimulus for as far as the eyes can see has potential to deliver an entirely new frame of understanding to "the markets remaining irrational longer than investors can remain solvent." Irrationality may just be the new norm.
It comes with a caveat, however. Investors must still remain paranoid that this can all flip at the drop off the hat. Just as irrationality works for optimism, the thin line that separates irrational pessimism remains ever present.
During December we have upped our long portfolio dramatically, to our longest overall net exposure since March/April. Unlike that time, however, our time frame isn't measured in months. These are trades that are judged day by day and week to week, at most.
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