Growing Pains in my Learning and Forecasting

I have thrown in the towel and am taking a step back. I have learned that the market can stay irrational longer than you can stay solvent. I have a new persona when it comes to market forecasting. One of patience. I have a new set of tools and metrics to look at: technicals, sentiment, and gov’t actions (don’t fight the Fed…this may change in the medium-term future)… I indeed did forecast a rally and even the beginnings of the dollar carry trade, however I fell in love with my thesis and was wasn’t cognizant that the US economy is a huge moving ship. Causes of a recession can take a LONG time to reflect themselves on main street and Wall Street. I wasn’t cognizant of using technical analysis, sentiment, and liquidity metrics to tweak my overall thesis. with that being said…

We have witnessed one of the most remarkable rallies in history.

A rally that began on the words of Vikrim Pandit uttering that business was looking better hasn’t looked back. I remember the exact day. Obama had, just days before, mentioned how equities were a good buy at these levels. (Upon retiring from the presidency, he might have jobs waiting for him at the financial sector!)

After almost 7 months of solid rallying (4 of which I was in denial) and approx +60% later…. I have come away with the following lessons….

–2/3rds of the time, the economy doesn’t even matter (Sentiment, liquidity/fund flows matter more)
–Always look at your technicals to confirm trends.
–Always be patient. Remember, the market can stay illogical longer than you can stay solvent…. you can come too early to the party.
–Always have a plan B….you won’t always be right.
–Dollar Cost average into and out of your positions

I’ve learned many other things about the mania that is the markets. It’s been great to be a part of these times, a part of history. This bull market has been a course all onto itself on other aspects of a large rally such as sentiment, technicals, and liquidity.

Though I still believe that this rally is hogwash, using my newfound knowledge, I will approach the situation with much more patience, and more thinking outside the box of just looking at the economy.

As I’ve said 3 times already, what we have seen has truly been history, comparable only to the 1930s.

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