Outrage is not a strategy

Amongst the many emails I get from readers, one category of emails which I file now days under "Outrage", are emails from people who are outraged by the rally.

Just received an email from someone after reading my yesterday's earning post saying 'I am outraged as this rally and bulls like you, you have no idea we are up to our eyeball in debt, earnings are all manipulated, this is just liquidity driven rally, it is all due to leveraged bets........' and so on. Most of these points are well known and there is no lack of bears actively dishing out their bearing prognosis for last 4 years.

Many of these assertions are just twisted logic. For example the point about leverage, now if you study the markets history, compared to what is an acceptable level of leverage today, many years back you could buy stocks on 10% leverage. There are so many ignorant commentators that the apprenticed investors listening to such nonsense are bound to miss out on profit making opportunities.

Earnings have been manipulated for more than 100 years, so what is new in it.Some commentators have discovered it now to buttress their hypothesis. They have no clue about how the earning game is played. You have to look below the hood of earnings, go deeper and you will find very profitable way to trade them. There is difference between earning surprise and real earning acceleration.

Outrage is not an investment strategy. What is the trade in your outrage. If you are outraged you still need to find market to go short. There is no shortage of stocks going down. If you have methodology to find them, you will find both long and short candidates.

The problem with just being angry, outraged and sitting on sideline is, unless you are selling newsletter or commenting on TV and get paid to do it, you are just wasting your time. You would do much better channelising that outrage in to developing profitable strategies.


Unknown said...

One of Jesse Livermore’s quotes:
“It takes a man a long time to learn all the lessons of all his mistakes. They say there are two sides to everything. But there is only one side to the stock market; and it is not the bull side or the bear side, but the right side. It took me longer to get that general principle fixed firmly in my mind than it did most of the more technical phases of the game of stock speculation.”
Being angry at the market is a losing strategy.

Pradeep Bonde said...

We have become an outrage nation. Everyone is outraged at something.

Adrian said...

Damnit Pradeep, stop pushing up the market! If it weren't for your witty, charismic posts which won over so many institutional buyers and your billion dollar bankroll holding up the market, stocks would have dropped months ago. Stop it, just stop it.