The Zero Sum – The Logical Imperative
Stock-Markets / Stocks Bear Market Oct 10, 2010 - 06:42 AM GMTBy: Charlie_Tarango
Courage of Convictions
Some things we read and hear over the course of Life we instinctively know at first blush are right – the hard part is figuring out “how”. Makes sense and sounds easy, but “how” ?
This was the case when I first read the great Jesse Livermore’s stricture, you must have “The Courage of your Convictions” in Markets. For Jesse he found learning to “Sit Tight” was the hardest thing to do. And indeed that is one of his greatest Pearls of Wisdom - if not the greatest.
Myself, finding the Courage of my Convictions was the hardest.
Zero Sum – The Logical Imperative
In any Zero Sum Game, when 99 % of the Participants are in any one Position, it is impossible that such is the Winning Position. That is not Opinion, but rather a Logical Imperative.
We keep hearing about the “Bears” – what “Bears” ? A thorough and in-depth analysis in Markets will reveal, that when you exclude “Short Positions” based on Hedging Net Long Positions ( as will be explained later ), 99 % of all Participant’s in all Markets are “Net Long”.
That means 99 % of all Participants across World Markets can only “Win” if prices continue to rise – and thus 99 % are in the “Winning Position” ? Delusion cannot create an Impossible Reality.
“AOM” – The Big ‘Tell’
We have been hearing more and more talk of the “All One Market”. We see the manifestations in Asset movements and fluctuations daily. Participants are only just starting to realize something is amiss.
This is “The Big Tell” that will lead to Participants tofinally understanding that Diversification is a fraud – akin to believing the World is Flat.
In the coming years, Participant’s will finally realize the World of Capital is not Flat. Not only will Diversification itself be discredited, but so too will all those who have advocated it, particularly in the vaunted Halls of Academia who have taught such.
Parenthetically, this will be a fitting catalyst and epitaph for the “Disgust” stage that will truly mark the bottom of one of the Great Bull Markets across asset classes ever recorded.
And here is why.
One Position
Participants all believe – and in the elite Halls of Higher Education it is taught – that the Instrument determines outcome. Ergo, “Diversification” of the Instruments will smooth the outcome, as to the two fundamentals tenets of Capital: Risk and Yield.
This is all false. In reality only two Positions exist in all Capital: Net Long or Net Short.
And like Space and Time, Aggregate Capital can only occupy one of those Positions at a Time.
It is Direction, therefore, that determines outcome - not Instrument. This is the “The Big Tell” of “All One Market” that is leading to this being widely understood, and the shattering of beliefs that will mark the “Disgust” stage.
Like the brilliant Sir Isaac Newton with respect to Gravity, Jesse understood this – but couldn’t explain why.
Net Wealth Creation = Secular Mathematics
The so-called “Debate” continues to rage on Inflation or Deflation. But rather than being a dialogue, it is the blind arguing with the blind. It all comes down to Occam’s Razor:
Net Wealth Creation Worldwide is insufficient to service existing Debt/Obligations even at these low tier Interest Rates.
Deflation is therefore the only possible outcome now.
The Road to Perdition
From the high water mark of any Participant’s Aggregate Capital in the period of 2007-2010, between the period of 2014 and 2020, every methodology, strategy, and allocation will fail to prevent Negative Net Yield.
Negative Net Yield for Capital means that at some point during that latter period, Participants will be able to calculate, clearly and equivocally, that total Deflation of their Aggregate Capital exceeded all Net/Free Cash Flow during the same period. Thus they have Worked for Nothing and have Paid to Lose.
The “Right” Position
As with all his words, Jesse simply and eloquently sums it all up: When it comes to the Market, there is only one side: The Right Side.
The “Right” Position now is 90% Net Short.
We frequently see individuals on Television and the Internet who boast their 10-20-30 years “Experience” and “Expertise” in Markets. Unfortunately for them, and all who would listen and follow them, not a single one has ever been in the Market when the only way to win over a protracted period of time is by being Net Short. And they all believe the World is Flat.
To manage Capital 90 % Net Short requires a skill set not learnable from the Existing Reservoir of Experience and Knowledge that exists in Markets today. The sum of Knowledge and Experience in Markets today is all on the “Long” Side. The “All one Market” is telegraphing that this is a losing proposition in a Zero Sum Game.
Most Participant’s are simply “Renting Yield” – they will be paying it back in due course, with Interest. “Volatility” is not a mechanism to gauge fear as is widely believed, but rather is operating now as a Yield Extractor by which to collect that ‘Rent’.
Most importantly, to be 90 % Net Short requires the “Courage of your Convictions”. Anyone who uses Technical Analysis of any kind, any ‘Indicator’, any “Black Box”, any “Theory” ( Dow, EWI, Cycles, etc.), does not have the “Courage of their Convictions”. Because if they truly did, they would understand that all of those are useless, and they wouldn’t need them. This is precisely why you see many “famous” Participants frequently changing from “Bull” to “Bear” – and lesser minions, seemingly changing month to month, and even week to week.
This is the greatest paradox in Markets: everyone is looking for and to, something or someone, to tell them what to do and when to do it – but nothing can. “Smith” never could and never will. Ole Jesse understood all of this so well.
There are only a handful of people in the World today who can manage Capital 90% Net Short. I am one of them, and my Services are available to the Highest Bidder.
g
Bio
Carlos is American in his mid forties living in Mexico, Privately Managing Capital for select Clients.
He is a self-made Man who retired independently wealthy some 10 years ago,
using that wealth to buy the most valuable commodity in the World: Time.
With it he pursued his Vision of Mastering the Game commonly known as “Wall Street”.
He is a Man who has the Vision to see what is possible and the Confidence to make it a reality.
Through the teachings and principles of the Great Jesse Livermore, Time, and his own Capital as Tuition, he has achieved that Vision, doubling Capital approximately every 3 years with
no more than 20 % risk at any given time.
In addition to Observing the Game, Carlos is a Father, Writes, provides informal Political Perspectives to select Leaders here, is writing a book ”Ideology of Liberty”, and is working to implement a Project to amend the Constitution of Mexico through the Repeal of Article 117, Section 8.
This Repeal will shift political and economic power to the Governors of Mexico in order to
prevent the fiscal and social disaster of Oil Depletion.
This article can be downloaded in PDF Format @ www.talentseekscapital.comCarlos can be contacted @ tlggroup@hotmail.com
© 2010 Copyright Charlie Tarango - All Rights Reserved Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.
© 2005-2022 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.
