Views on timing markets and other things by not an economist.
tl;dr macroeconomics is a dark science
I have a friend, we’ll call him Alf. Alf is regularly sharing his views on markets with me. Looking to me for direction. He watches the same channels that everyone else watches (my suggestion is to watch zero news) and says things like: “The market is going to go down next week, up next month, if the groundhog sees his shadow the market historically fakes left and moves right, and during wars, “X” type of assets (apartment buildings, NFTs, crypto, Tesla, AMC, whatever) go to the moon or zero, or will be up X% in the next X months…” or whatever. He hears someone famous on pick your channel (CNBC, CNN, FOX, whatever) say something similar and that guy is the Chief [insert bullshit title] Officer of a multi-billion dollar something or other. He’s had a lifetime of good outcomes so he must know what he’s talking about.
Survivorship Bias. Think about the coin flipper competition. The person who gets heads the most, wins. 100 people each get a coin, maybe 1,000. they flip it. 500 people hit heads, and 500 tails. Then there’s 250 left, 125, and so-on. Finally there are 5 left. And they’re flexing their thumbs and rubbing their hands together. 3 of them hit heads. Now those three repeat some mantra to themselves, some positive reinforcement, they visualize the heads, and 2 of them hit tails, one hits heads. Now he’s interviewed later on television. He’s a genius and he tells his story about how it’s all about the thumb and its relationship to Buddha and visualization and he wore the same underwear for two days. I’m not discounting the hard work for smart people, but I do want to point out our tendency to idolize the people that have great outcomes. Sometimes a lottery ticket is a lottery ticket.
Do not take seriously anyone that confidently predicts a what with a when from a macro perspective (inflation, prices, any variable with zillions of dependencies), unless that when contemplates a multi-year window.
Recently, I thought to myself, “finally I can lean into my call on interest rates that I’ve been incorrectly making for years. Time to load up on a short position on long bonds. The fed is literally calling it.” 5 min later, Russian invades Ukraine.
You can call a what, (a variable) and, if you want to be ballsy, maybe you throw a 2 year window at it; 10 if you want to be reasonable. Everything (bound by the laws of physics), given enough time, will eventually happen. The thing about macroeconomics, and for me it is the most wonderful subject to study because it’s so abstract, is that there are so many dependencies that outcomes really can’t be accurately predicted in a narrow window of time. If they could, there would be no roller coaster market cycles, debt cycles, inflation, deflation, etc.. everything would move in a smooth line. But markets don’t move like that (except AMC or Doge. To the moon), especially since the primary driver of the big macro outcomes like prices and markets are consumer sentiment (the madness of crowds). It, so far, is quite impossible to predict how a set of events and outcomes will be interpreted by individuals, and groups of individuals and how they in turn will interpret each other’s behavior.
The only guarantee is that everything will eventually happen if we don’t break physics and the sun doesn’t die first (or some other great filter event). And to be honest, our understanding of physics is limited to our understanding of physics. Until there is a theory that unifies the big and the small, we’re really just kind of hurdling through space without a compass. I feel like i’ve gone off topic.
Anyone that tells you what a stock, the nasdaq, prices, etc.. will do, with any degree of confidence, over any short period of time (days, weeks, months) is either a billionaire and you’re lucky to be talking to her, or an idiot (in the case of the billionaire, there is the chance of the lucky idiot).
"Mimicking the herd invites regression to the mean."
Charlie Munger