Most Popular
1. It’s a New Macro, the Gold Market Knows It, But Dead Men Walking Do Not (yet)- Gary_Tanashian
2.Stock Market Presidential Election Cycle Seasonal Trend Analysis - Nadeem_Walayat
3. Bitcoin S&P Pattern - Nadeem_Walayat
4.Nvidia Blow Off Top - Flying High like the Phoenix too Close to the Sun - Nadeem_Walayat
4.U.S. financial market’s “Weimar phase” impact to your fiat and digital assets - Raymond_Matison
5. How to Profit from the Global Warming ClImate Change Mega Death Trend - Part1 - Nadeem_Walayat
7.Bitcoin Gravy Train Trend Forecast 2024 - - Nadeem_Walayat
8.The Bond Trade and Interest Rates - Nadeem_Walayat
9.It’s Easy to Scream Stocks Bubble! - Stephen_McBride
10.Fed’s Next Intertest Rate Move might not align with popular consensus - Richard_Mills
Last 7 days
Stock Market Trend Forecast 2024 - 15th June 24
Gold Price Consolidating at High - 15th June 24
NVIDIA Stock Market: Price Prediction for the Future - 15th June 24
When Will the Boom/ Bust Rollercoaster End? - 15th June 24
Stock Market Trouble Lies Ahead. Are You Ready For It? - 15th June 24
Stock Market Investor Sentiment - 8th June 24
S&P 494 Stocks Then & Now - 8th June 24
As Stocks Bears Begin To Hibernate, It's Now Time To Worry About A Bear Market - 8th June 24
Gold, Silver and Crypto | How Charts Look Before US Dollar Meltdown - 8th June 24
Gold & Silver Get Slammed on Positive Economic Reports - 8th June 24
Gold Summer Doldrums - 8th June 24
S&P USD Correction - 7th June 24
Israel's Smoke and Mirrors Fake War on Gaza - 7th June 24
US Banking Crisis 2024 That No One Is Paying Attention To - 7th June 24
The Fed Leads and the Market Follows? It's a Big Fat MYTH - 7th June 24
How Much Gold Is There In the World? - 7th June 24
Is There a Financial Crisis Bubbling Under the Surface? - 7th June 24
Bitcoin Trend Forecast, Crypto's Exit Strategy - 31st May 24
Zimbabwe Officials Already Looking to Inflate New Gold-Backed Currency - 31st May 24
India Silver Imports Have Already Topped 2023 Total - 31st May 24
Gold Has Done Its Job – Isn’t That Enough? - 31st May 24
Gold Stocks Catching Up - 31st May 24
Time to take the RED Pill - 28th May 24
US Economy Slowing Slipping into Recession, But Not There Yet - 28th May 24
Gold vs. Silver – Very Important Medium-term Signal - 28th May 24
Is Gold Price Heading to $2,275 - 2,280? - 28th May 24
Stocks Bull Market Smoking Gun - 25th May 24
Congress Moves against Totalitarian Central Bank Digital Currency Schemes - 25th May 24
Government Tinkering With Prices Is Like Hiding All of the Street Signs - 25th May 24
Gold Mid Tier Mining Stocks Fundamentals - 25th May 24
Why US Interest Rates are a Nothing Burger - 24th May 24
Big Banks Are Pressuring The Fed To Losen Protection For Depositors - 24th May 24
Another Bank Failure: How to Tell if Your Bank is At Risk - 24th May 24
AI Stocks Portfolio and Tesla - 23rd May 24
All That Glitters Isn't Gold: Silver Has Outperformed Gold During This Gold Bull Run - 23rd May 24
Gold and Silver Expose Stock Market’s Phony Gains - 23rd May 24
S&P 500 Cyclical Relative Performance: Stocks Nearing Fully Valued - 23rd May 24
Nvidia NVDA Stock Earnings Rumble After Hours - 22nd May 24
Stock Market Trend Forecasts for 2024 and 2025 - 21st May 24
Silver Price Forecast: Trumpeting the Jubilee | Sovereign Debt Defaults - 21st May 24
Bitcoin Bull Market Bubble MANIA Rug Pulls 2024! - 19th May 24
Important Economic And Geopolitical Questions And Their Answers! - 19th May 24
Pakistan UN Ambassador Grows Some Balls Accuses Israel of Being Like Nazi Germany - 19th May 24
Could We See $27,000 Gold? - 19th May 24
Gold Mining Stocks Fundamentals - 19th May 24
The Gold and Silver Ship Will Set Sail! - 19th May 24

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

The Matrix of Market Psychology

Stock-Markets / Trader Psychology Jul 07, 2021 - 03:22 PM GMT

By: Gary_Tanashian

Stock-Markets

In the midst of work uncovering a target for the US dollar that will surprise many if it comes about, of taking a hard look at the messages of long-term Treasury yields and the yield curve, defining potential macro outcomes (inflation, Goldilocks or deflation) based on these indications and planning strategy accordingly, NFTRH 662 got a little out there with a discussion of the mindset that is behind the name of the Notes From the Rabbit Hole service.

The mention of John Hussman (I could also have put the estimable Jeff Snider or the Robert Prechter of yore in this piece) is not meant to insult. It is meant to simply state that a fiduciary manager like him, honestly following his work, is not geared to make significant gains during high risk market phases.

I too do not make the gains I could make (temporary though they would be) if I were a blue pill gulping all-in happy idiot. I am bound to ongoing risk management, but also avoiding the red pill while profit making and profit taking (part of risk management) with an awareness of the importance (for me) of high cash levels in a persistently high risk market (as defined by structurally over-bullish sentiment among other things).


Though the name Notes From the Rabbit Hole implies that a red pill popper produces it, I had to unlearn certain ways of the lunatic fringe the better part of two decades ago when I realized that one foot in each world is the only rational way to go about managing an over-stimulated market with cynical monetary and fiscal policy always in the mix.

Excerpted from NFTRH 662:

The Matrix

So the bright side (or dark side, depending on how you view it) is that Goldilocks [the work in #662 is not projecting a persistent Goldilocks economy, but it is allowing for it as a lower probability option] could go from a bounce to a trend as the Fed’s “transitory” inflation view carries the day, gold bugs are sent back to the hell they came from much like in 2012, and the Matrix resumes operation as usual. From Wikipedia:

“In The Matrix, the main character Neo is offered the choice between a red pill and a blue pill by rebel leader Morpheus. The red pill represents an uncertain future—it would free him from the enslaving control of the machine-generated dream world and allow him to escape into the real world, but living the “truth of reality” is harsher and more difficult. On the other hand, the blue pill represents a beautiful prison—it would lead him back to ignorance, living in confined comfort without want or fear within the simulated reality of the Matrix. As described by Morpheus: “You take the blue pill…the story ends, you wake up in your bed and believe whatever you want to believe. You take the red pill…you stay in Wonderland, and I show you how deep the rabbit hole goes.” Neo chooses the red pill and joins the rebellion.”

Discussion

Seriously, how perfect is this analogy? And why on earth do you think you are reading a publication called Notes From the Rabbit Hole?

One thing we will not always be is right. But one thing this service will always be is respectful of both pills, while ingesting neither. You take the blue pill and you are a happy idiot, gainfully making coin until the music stops (as it always does sooner or later in this boom/bust continuum created by strenuously overdone policy) and you become a victim of your own lethargy. You take the red pill and you become an angry gold bug or perma market bear railing against the manipulation “they” have victimized you with.

You become a gold promoter (pick your favorite high profile perma-pumper) cheer leading inflation and gold through thick and thin, or you become John Hussman, intellectually laying out the perma-wrong economic and market bear case day after day, week after week, month, year… gulp, decade after decade.

In short, if you want to make gains in your intrinsically worthless dollars you need to respect the blue pill. That is the lesson I learned in the 2003-2004 time frame. But by continuing to have respect for the red pill (i.e. never losing sight of the macro’s bust side of the boom/bust continuum) I do not make the gains that all-in bubble participants make before they lose most or all of them, but I manage quite well along the journey.

Who wants intrinsically worthless dollars, you ask? Well, people who want to exchange them for things of value like gold (monetary), land, other resources/assets or even debt repayment (practical). In short, you play the Matrix’s game, get compensated in debt paper and then just maybe turn that funny munny into something real as long as the Matrix holds together.

Since I began functionally applying these metaphors to my investing style about 17 years ago the Matrix has been in danger of coming unwound the whole time. I myself used to warn about that, probably putting too much fear in the analysis early on but over time realizing year after year that the market can remain irrational longer than you can remain solvent (if you fight it). Or my friends, is it WE who are irrational if we fight it?

Two decades ago I was vulnerable to perma-bearish market messages and perma-bullish gold messages as well. I learned my lessons and hence, you have a manager who is dedicated to walking both paths, staying open minded and not falling for dogma or bias disguised as analysis that comes from it.

There is a middle road between the auto-pilot traveling mainstream financial services machine and the red pill gulping lunatic fringe. That is our road.

For “best of breed” top down analysis of all major markets, subscribe to NFTRH Premium, which includes an in-depth weekly market report, detailed interim market updates and NFTRH+ dynamic updates and chart/trade setup ideas. You can also keep up to date with actionable public content at NFTRH.com by using the email form on the right sidebar. Follow via Twitter ;@NFTRHgt.

By Gary Tanashian

http://biiwii.com

© 2021 Copyright  Gary Tanashian - 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.

Gary Tanashian Archive

© 2005-2022 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in