Wednesday, August 15, 2007

Investor or Gambler?

Tom from InvestorGuide.com sent me an article of his to read regarding the differences between investing and gambling. Tom did a great job in discussing the two terms fairly. Very hard to write an article like that without exposing unknown biases.

I did find a couple of very minor areas where I disagreed with Tom's article. I shared those comments to Tom in an email. But, felt those comments would be helpful to readers of this site. First read Tom's article. Then my comments below...
Tom's article:
There's a big difference between buying a stock after thoroughly researching it and buying a stock by hitting it on a dartboard.
My comments:
Is there really a big difference...in outcome? Sure, the person may feel different about the investment...but based on outcome alone...historical evidence would suggest the odds of success are approximately the same.

Tom's Article:
Gambling - "Any activity in which money is put at risk for the purpose of making a profit, and which is characterized by some or most of the following...no net economic effect results."
My comments:
I would argue that each player in the stock market provides a positive economic effect. The investor provides long-term capital to companies in need of capital. The speculator and gambler provide liquidity. Sure there are negative effects from all players...investors prop up some companies that probably shouldn't receive further funding...and will eventually go bust. And speculators/gamblers can turn liquidity into a frothing market that can cause long-term problems after the swell has subsided.

Of course, your point is true that gamblers' short-term trades may be a net effect with each other...but that activity regardless of reason or length of hold...still provides liquidity for other players in the market.

Basically, remove any player from the game...and the market wouldn't be what it is.
That's it from here where I've got a softball game to prepare for this week. I haven't played softball since my college days. And haven't thrown many balls since my shoulder surgery. Should be an interesting show to say the least.

Later Trades,

MT

Saturday, June 09, 2007

Weekend Readings - Search for Alpha

Sharing some great links found this morning while enjoying a Starbucks coffee and Krispy Kreme doughnut. :-)

A great Quantitative Primer from the Bionic Turtle.

Nice little profile on Parametric Portfolio Associates by Bloomberg Markets Magazine. I enjoyed reading their rebalancing alpha along with their contrarian weighting of individual stocks for each country. In fact, check out Parametric's Research & Whitepapers area...great information to be had. Their paper on Using Statistical Process Control to Monitor Active Managers is one to read a few times this weekend.

One view shared by Parametric coincides with my recent testing of alpha filtering in the U.S. Equities market. Parametric found that smaller countries exhibit less correlation to the broader markets. My guess is due to less investor attention, liquidity issues, and such. In essence the markets are less efficient which enable Parametric to extract alpha (non-commoditized beta) by overweighting these smaller countries in their portfolio compared to the index they track. I found that by increasing the frequency in my alpha calculations...the fewer stocks I found that could beat the market (high alpha). Increasing the frequency to daily in my alpha filter picked up only the most illiquid stocks in the market out of the 20,000 stocks in my database (including the delisted). What does this mean? These stocks are the less followed? Less efficient? Their returns are least effected by the broad market? Short-term...all other stocks are governed by the overall market returns? Only if you extend your time horizon do stocks capture more alpha from the market? My recent testing shows this to be a possibility.

So, what should an investor/trader do? Well, if you're a daytrader, you should pay much more attention to the market in general. The market acts as a powerful force in a stock's short-term returns. If you're an investor...extending your time horizon months if not years is a way to capture more (alpha) than the market gives (beta) to each individual stock. Think about it...anywhere the market is efficient...the market governs the behavior. Only when you drive outside of that efficient zone do you capture non-market behavior. Holding stocks for the very long-term is one road outside of the city.

World Beta finds an interview with Harvard's Endowment manager,El-Erian. El-Erian claims his biggest challenge is overcoming the popularity of the endowment model. Which I tend to agree.

Finally, for you R fans out there...check out the Econometric tools for performance and risk analysis created by Brian G. Peterson and Peter Carl. Need to calculate the Information Ratio, Sharpe Ratio, Sortino Ratio, max drawdowns, rolling returns, CAPM, Kelly Ratio, and Omega on your portfolio's returns? Then this PerformanceAnalytics package could be just the ticket. I have yet to work with this feature-rich package...but have it on my list of to-do's over the coming weeks.

That's it from TaylorTree...where the weather is beautiful, coffee is great, and I've got an afternoon of fishing in my future.

Later Trades,

MT

Monday, May 28, 2007

Manager Focus - Robert B. Gillam

I recently read an interview with McKinley Capital Management founder, Robert B. Gillam. Very interesting guy and investment style. Mr. Gillam setup shop in Alaska of all places. Despite the remote location...he runs a heavy "quant" shop. His work on ranking of stocks based on performance and risk (OR Index) bears further study from yours truly.

What drew me to Mr. Gillam's interview was his research on stocks making new highs and new lows. Mr. Gillam found stocks making new highs on any given day to have a greater than 70% chance of hitting another new high in the next 90 days. And stocks making new lows to have a greater than 65% chance of making another new low in 90 days. Then goes into the how and why of his research. Great stuff!

Check out these articles for further information on Mr. Gillam...
Background on Robert Gillam and McKinley Capital Management.

U.S. Blinders Hinder Stock Pickers. This is a great article covering Mr. Gillam's expansion into international investing.
Here's an article from Mr. Gillam's son, Robert A. Gillam...
STUDY CHALLENGES CONVENTION: Growth, value style distinctions also important in international investing from Pensions & Investments.
This breakup between styles reminds me of an interview with DFA's founder, Rex Sinquefield. Mr. Sinquefield discussed how value stocks were riskier than growth stocks despite their similar volatility. Thus the reason for value stock's higher returns over the years.
Have a great week!

MT

Sunday, May 20, 2007

Weekend Linkfest!

The Beta in Alpha's clothing? (pdf) Bridgewater Associates' detail how various hedge fund's are charging Alpha prices for Beta returns.

How to differentiate Alpha from Beta in those hedge funds? Check out AllAboutAlpha's post titled, Mommy, Where do alphas come from? AllAboutAlpha does a great job of summarizing Andrew Lo's paper, Where Do Alphas Come from?: A New Measure of the Value of Active Investment Management. Lo explains how to differentiate active returns from passive and more importantly what value the active returns add to the total returns of the portfolio. Cool stuff!

Very interesting draft, When Do Stop-Loss Rules Stop Losses?, by Kathryn M. Kaminski and Andrew W. Lo. They find stop-losses improve returns and reduce volatility compared to buy & hold. And stop-out periods were distributed uniformly over time versus only during small market crashes.

MOSERS discusses how to handle residual cash in a portfolio in the following newsletters, Rebalancing and Cash Securitization and Rebalancing II. I was shocked to discover how big of an impact residual cash had on my returns during my market studies. A cash drag indeed! Very important to get that cash, no matter how small, back into the market in order to generate further market returns.

Enjoy your week!

MT

Tuesday, May 01, 2007

Quote of the Week - Busy Bee

"I really believe that success is just getting up one more time than you fall. It doesn't come from one brilliant idea, but from a bunch of small decisions that accumulate over the years. And you shouldn't underestimate the amount of work that's involved, the amount of fear that's involved." -- Roxanne Quimby
I love unconventional success stories. And Inc.com shares a great one with Burt's Bees founder, Roxanne Quimby.

Enjoy Quimby's story? Here are a few more interviews with the busy bee...
After Burt's Bees, What? from Business Week

Interview with Burt's Bees founder, Roxanne Quimby from Hilary Magazine.

MT

Saturday, April 28, 2007

Sky is Falling...

According to this article, Jeremy Grantham believes the sky is falling.
"The bursting of this bubble will be across all countries and all assets, with the probable exception of high-grade bonds," Grantham warned. "Since no similar global event has occurred before, the stresses to the system are likely to be unexpected. All of this is likely to depress confidence and lower economic activity."
But, plenty of hedging is done as to the timing of the fall.
As for timing, he (Grantham) concedes that's impossible to predict. But here's the kicker: Even Grantham thinks you probably need to be bullish right now. The reason? Most bubbles, he notes, go through a short but dramatic "exponential phase" just before they burst. Like Japan in 1989 or the Internet in early 2000.
How does this type of prognostication help anyone...I asks ya's?

Grantham's bold statements and subsequent hedging of bets is something a lot of market pundits do. This allows them to zig and zag at the same time. If the market goes down big, Grantham claim's victory. If the market goes up big, Grantham claim's victory. A win-win scenario.

This type of hedge may prove useful in other pursuits. For example, wouldn't it be nice to lead a programming project and hedge the timeline of the project?
Yes, we will make the May 1st deadline unless we don't.
The above statement doesn't work because it's not wordy enough. Too simple...straight to the point.
We fully expect to meet the May 1st deadline. All components have been reviewed, tested, and verified to meet our stringent requirements. But, there is always the case that problems may arise due to circumstances outside our control. These problems may impact our schedule and possibly result in extending the deadline.
There, that's better. A great hedge!

Well, that's it for me this Saturday morning. I'm taking my daughter fishing today. Of course, the fishing trip may be delayed or cancelled if changes in the Earth's atmosphere produce drops of water from the sky. ;-)

Later Trades,

MT

Monday, April 23, 2007

Quote of the Week

"If you spend some time thinking about it ("ideal position sizing") you will realize that life just isn’t so simple. Every individual has different tolerances for different types of risks. A formula won’t capture all of them and a formula most certainly hides information that might be very valuable." -- Curtis Faith
Great article posted by Curtis today . Discusses some of what I found to be true in regards to the Sharpe Ratio and smoothness of returns. In fact, through much testing I have found using any type of volatility measure in my trading systems (entry, exit, position sizing, etc.) produces sub-par results when real-world results take effect. But, sometimes, those are the best measures we have. So, what do you do?

I think it's important to do what Curtis asks...
I’ll leave you with an exercise. Take your favorite position sizing methodology and then see what might happen if you happened to take the wrong side of a trade using that methodology on September 11th, 2001 or on Black Monday (October 19th, 1987).
In regard to formulas hiding valuable information. Pay attention to your stock data. There's a formula in there adjusting your time series for splits and possibly dividends. The longer term your system is...the more important this adjustment formula will play in your overall results. Common entry/exits formulas such as Average True Range (ATR) become rather out-of-date when processing IBM back in the 1960's. Something for all aspiring long-term trend-followers to consider when backtesting their systems.

Enjoy your week! I'm enjoying my first day of vacation since moving up to Missouri. And what a pretty day I picked out. What to do...what to do... ;-)

Later Trades,

MT

Monday, April 16, 2007

Another Year Down...

Enjoyed a great birthday today. Co-workers took me out for lunch. Wife and kids took me out for dinner. Wife and daughter baked a birthday cake. Between all the eating...received some great presents. Gifts centered on my favorite things...

Movies...some goodies for movie nights at the Taylor House.

Music...received the iPod Nano...and loving it. Can't wait to get back to music during my working hours. Bring some calm to the ADD. Serenity Now!

Coffee...all kinds of great flavors. And a few trips to Starbucks are in my future.

With another year in this world notched in my belt...what have I learned? What wisdom can I share? Well...

1) Moving your wife and kids out of state...miles and miles away from home, family, and friends...is easier than I thought it would be. Of course, we went into this move 100% committed. And chose a great city to live, company to work for, and people to work with.

2) Moving away from your home state draws you closer to your home state. Make sense?

3) Winters are cold in the Midwest! But, the snow is fun! Still upset I found the best place to sled on the last day of the last snow.

4) I miss living in the country...the quietness...remoteness. But, city living sure has its perks. A Starbucks a few blocks away is one of them. ;-)

5) I still don't know why every Fall and Spring when the weather is beautiful...I want to hop in my truck...grab a cup of coffee...throw on some Charlie Robinson and look for houses to fix-up. What's even stranger...a friend of mine noted the same feeling to me today. Maybe it's a guy thing? Or maybe it's because I spent the last 8 years fixing up houses. This is the first year I don't have a fixer-upper to fix-up.

6) So much time is wasted on the market. I know...I've wasted it. But, this wasted time is the filtration process of learning what's important in investing. The more time wasted and time wasted acknowledged...the closer you come to what's important.

7) Learning is hard. Scary. Stressful. And very rewarding. Of course...
"Learning is not compulsory...neither is survival." -- W. Edwards Deming
8) Life is up for grabs. Whatever you want...it is yours to take. It's usually not the brightest, best, or most deserving person that gets the job...raise...or whatever opportunity you wanted that they now have. It's usually the person who wasn't afraid to take it that takes it. The person who won't let things such as not being the brightest, best, or most deserving from getting what they want. One of the most amazing things in life is...Momentum Builds. And as long as reasons prevent you from taking that first step...you'll never get anywhere else than where you are right now.

9) Great mentors are another amazing thing in life. If you don't have one...seek one out. I think this was one of the biggest problems in my life. I attempted to do everything on my own. And this works up to a point...until you get stuck. And when you get stuck...mentors have the ability to...
"share their hindsight which can become your foresight."
10) And finally, birthday's are just another day. Unless you make more of them than that. They are after all...the day you started Life University. And each year marks your progress towards your chosen degree. You do have a chosen degree don't you? Otherwise, how else are you going to graduate? ;-)

Later Trades,

MT

Wednesday, April 11, 2007

Showing Up

"Seventy percent of success in life is showing up." -- Woody Allen
You will earn more respect recovering from a failure than by never failing at all. Weird, I know. But, very very true. Question is...how do you recover from a failure?

Show up, don't give up, pound away at your problem until it is no longer there. Steve Leslie discusses the essentials of "pounding the rock" and never giving up in this post over at Daily Speculations.
"It also provides inspiration for all of us who tend to get absorbed in our own challenges and problems, and serves as a reminder that most of success in life is showing up for work every day and "pounding the rock". And if we stay the course and never yield and keep swinging, eventually the rock will yield and break up and victory will be had. There is a light at the end of the tunnel if we do not quit and no matter the challenge, success is far closer than we think it is."
Steve mentions the Daniel Ruettiger's story...the inspiration for one of my favorite movies of all-time...Rudy. I can still remember watching it with my wife before we were married. Tears, laughs, and all. Good stuff!

MT

Quote of the Week - Losing

"It turns out that it is much easier to make money when you are wrong most of the time. If your trades are losers most of the time, that shows that you are not trying to predict the future. For this reason, you no longer care about the outcome of any particular trade since you expect that trade to lose money. When you expect a trade to lose money, you also realize that the outcome of a particular trade does not indicate anything about your intelligence. Simply put, to win you need to free yourself and your thinking of outcome bias. It does not matter what happens with any particular trade."

-- Curtis Faith in Way of the Turtle --

MT

Thursday, April 05, 2007

Quote of the Week - Explore, Arrive, and Know

We shall not cease from exploration
And the end of all our exploring
Will be to arrive where we started
And know the place for the first time.

-- T.S. Eliot
MT

Thursday, March 22, 2007

Brick by Brick, Dr. Steenbarger

Read Dr. Steenbarger's article on A Mechanical Strategy That Has Produced Consistent Stock Market Profits. Awesome! Just awesome!

Wish I would have read it before I posted my Quote of the Week this week. Cause it illustrates my points about Buy and Hold better than my scatterbrained comments ever could. Some great tidbits from Steenbarger's posting...

"Buy and hold over the course of a 25 year investment career has never lost money going back to the start of my historical data in 1901."

"How many in-and-out traders, over the course of a 25-year career, can achieve such consistency and returns? How many actively managed funds can boast of such a record?"

"...an investor needs to tune out the many, many "sky is falling" jeremiads that were issued over those years, as market commentators became convinced that market meltdowns were in the offing. Consider the fact that, for the career investor, those cries of doom have never been vindicated. Never."
And finally...
"If we were to trade in and out of careers every time we became fearful of our current career progress or every time another career looked better, we'd wind up with a lifetime of unfulfilled promise."

Later Trades,

mt

Monday, March 19, 2007

Quote of the Week

"Brick by brick my citizens, brick by brick" -- Emperor Hadrian of Rome
I haven't posted much in awhile. Mainly because the more I learn the less I know. The less I feel I can share. The less certain I feel about things. The study of the market is a strange bird. So different than anything else I've dug into.

Investing is like programming yet you're switching languages, tools, platforms, users, business rules, etc. every week, day, hour, or even minute.

Just when you feel comfortable about your knowledge...your experience...the market changes on you. So, you're left with a few options. You can...

1) Pontificate. Throw lack of knowledge to the wind and show off that big chip on your shoulder. Pontificate at will as to what the market will and won't do. If your wrong...then so what? Pontificate a little more...and a little louder. Don't stray from your point of view. You are a contrarian after all. Take solice in that.

2) Daytrade. Since the market changes so fast and so often...embrace it. Change with it. You gain a lot of experience this way...no doubt about it. Always expanding, learning...and never getting comfortable. Those are the keys to success with this option. Note: Swing traders fall into this category as well. In fact, you'll find most daytraders have swingtraded and swingtraders have daytraded. All depends upon the speed in which the market is changing and the speed in which the person is comfortable with the changes. :-)

3) Invest for the long haul. Forego all the hip hopping around of the market. Buy and sit on your hands. Yes, I said that right. Cast that chip off your shoulder. Your grasp or lack-of on the ever changing cycles. Give up the notion that working harder equals greater returns. And most importantly, give up the ever incessant discussion as to why the market is top-heavy...bottomed...or bubblicious. Realize that your returns are generated from the market...not from you. Ouch! How's that for an ego buster.

If you haven't figured it out...I've chosen all 3 options at one time or another. But, for the past year I've stuck with option 3 - Buy and Hold (with a trailing stop). And I won't lie to you...it's lonely. Tough. Aggravating. For a workaholic like myself...it has been especially difficult to let the market generate my returns. But, the method is working. Brick by brick.

So, sorry for the lack of posts. Besides not having much to say about the market...I have been busy with completing my backtesting platform project. And for the most part, it's complete. The cool thing is I'm now able to test at the portfolio level all systems and allocations across thousands of stocks (20,000+). In fact, here are 3 things I've learned from this project that is market-related:

1) Important to test your ideas on the market without cash constraints. Because using cash limits your trades. And you need to see the impact of all trades in order to judge whether your idea is worthy of attention. Boot-strap simulations prove helpful here as well.

2) Test ideas with cash constraints. You may have an idea that does amazingly well...but just a few trades will wipe your cash out. And if you wipe your cash out...you're wiped out.

3) Carefully optimize your logic. Curtis Faith explained it better than anyone I've read as to how to best optimize your system. Avoiding the top of the curve is the key.

And here are 3 things I've learned from this project that is programming-related:

1) When looking for the fastest way to read and write vast amounts of simple data...avoid the plethora of databases out there. I've tried everything from PostgreSQL, MySQL, SQLite, BDM, SQL Server, KirbyBase, and many more. Nothing and I mean nothing even comes close to plain vanilla CSV files. Nothing! If you can imagine...it's even faster to sequentially read a CSV file to pickup a record by date than to query a db directly for that row.

2) Python is much faster than Ruby when it comes to processing CSV files and not much slower than C.

3) Programming a backtesting platform is not complicated...actually very simple. But, completing this project sure did test me. Why are the simplest things the hardest to program?

Later Trades,

mt

Friday, March 16, 2007

A New Blogger - Curtis Faith

Curtis Faith has a new blog, Way of the Turtle. Check it out. Loved the On Writing a Book post. Great start Curtis!

Also, I urge you to check out Mr. Faith's new book, Way of the Turtle. Good stuff!

Later Trades,

MT

Thursday, January 11, 2007

Quote of the Week - (2007-01-11)

"You better know whatcha wanna to do, before somebody knows it for you." -- Charles Farmer in The Astronaut Farmer
Hope everyone is having a great week. Mine's been busy as ever. I hope to catch up on some reading over the weekend. Finish up the book, Trend Trading by Kedrick Brown. Dig in a bit more into the C language. Yes, I said C...the latin of programming languages.

I downloaded the MinGW compiler this week and wrote my first "Hello World" program in C. Then proceeded to open and read a CSV file. Whoa! Stop the bus! Not as simple as R, Ruby, Python, Pascal, and Cobol. Much to learn, much to learn.

Later Trades,

MT

Tuesday, January 02, 2007

Quote of the Week (2007-01-02)

Shlemiel gets a job as a street painter, painting the dotted lines down the middle of the road. On the first day he takes a can of paint out to the road and finishes 300 yards of the road. "That's pretty good!" says his boss, "you're a fast worker!" and pays him a kopeck.

The next day Shlemiel only gets 150 yards done. "Well, that's not nearly as good as yesterday, but you're still a fast worker. 150 yards is respectable," and pays him a kopeck.

The next day Shlemiel paints 30 yards of the road. "Only 30!" shouts his boss. "That's unacceptable! On the first day you did ten times that much work! What's going on?" "I can't help it," says Shlemiel. "Every day I get farther and farther away from the paint can!" -- Shlemiel the painter algorithm
Ran across this great interview of Joel Spolsky from Salon back in 2004. The dude has some great things to say...

In reference to the various software development methodologies:
There's certainly a lot of faux methodologies, what I often call "big-M" methodologies, extreme programming being a very popular one right now. And even when they're reflecting good ideas or best practices, the real goal of the methodologies is to sell books, not to actually solve anybody's problem. And selling the books is actually just a way to sell consulting engagements that the people who write those books do at high cost; that's their career -- giving speeches to people working for very boring companies on how to do software better.

In reference to creating software that will automatically translate a user's desire into code:
The fundamental problem that you're trying to solve here is that humans think of things in vague, mushy terms. In order to visualize something, they don't have to actually visualize every part of it. Whereas the programmer, in order to actually implement that thing, to create it, needs to have every part specified.

(continued...)

So your brain doesn't actually work the way a computer works. Your brain doesn't assume that there's all this input coming in and then process it. Instead, it just has a variety of senses available to it, and it picks the ones it wants to answer whatever questions it has right now. So you ask questions, and your eye goes and finds out the information it needs. So you're used to thinking that you have the big picture , and you don't.

(continued some more...)

And so what a programmer is doing when they translate a quote unquote spec into quote unquote code, although it seems like a translation process, what they're actually doing is filling in lots and lots of details. And as programmers are wont to do, they're trying to take something, the vague thing that the humans want, and make it very, very specific, which is the kind of thing the computer wants. That's not really a translation; it's more of an interpretation. It's a very hard thing to do.
Read Joel's Back to Basics post for more interesting tidbits on Shlemiel the painter algorithm, Pascal strings, and my favorite...XML performance issues. I've developed and supported EDI transaction processing for over 9 years and witnessed first hand the problems Joel discusses with XML. Great stuff!

Happy New Year!

MT

Sunday, December 24, 2006

Happy Holidays!

Twas the night before Christmas, when all through the house
Not a creature was stirring, well, except for TaylorTree.

I wish you and your family a wonderful Holiday Season!

MT



Sunday, December 17, 2006

Quote of the Week - Know Thyself

Boy: "Do not try and bend the spoon. It is impossible. Instead, only try to realize the truth."

Neo: "What truth?"

Boy: "There is no spoon."

Neo: "There is no spoon?"

Boy: "Then you'll see that it is not the spoon that bends...it is only yourself."

-- from the Matrix (one of my all-time favorite movies)

Hope all is well. I'm as busy as a bee...buzz, buzz, buzz.

Later Trades,

MT

Wednesday, December 06, 2006

Thread of the Week - Stock Distributions

Eric Crittenden shared an interesting study of stock distributions over at the Trading Blox Forum.

How many of you look at the Annual Compounded Returns graph and immediately think...man, I gotta get me some of those 3,000 plus 10% to 20% returns! If I can just find an edge, a better indicator, profit targets, something to capture them. Work it like a Casino, baby!

How many view the graph and have the 344 100% or more returns catch your eye? Or better yet...stare in amazement at the Terminal Wealth Relative graph and its 2,000 plus returns of 500% or more. Count me in that camp.

This study really confirms what the market is all about. Unlimited gains and limited losses. If you time the market or cap your profits in order to capture and/or protect those small gains...you'll...as Eric says...
"virtually guarantee to participate fully in the left side of the distribution and not in a positive way."

Really after giving this study more thought...it seems after you set yourself up for success via capturing the right side of the distribution...it is then just a matter of managing risk. Right? And not from the sense of your initial risk in the stock via volatility based position sizing. But, from maintaining a certain risk profile throughout the entirety of the trade. As these positions move further in your favor...I would assume their risk profiles could differ greatly from the original risk set forth.

Again, interesting study. Thanks Eric!

Later Trades,

MT

Monday, December 04, 2006

Quote of the Week

Caston glared. "Observation selection effects are totally commonplace. At the supermarket, have you ever noticed how often you find yourself in the longer checkout lane? Why is that? Because those are the lines with the most people in them. Let's say I told you that Mr. Smith, about whom you knew nothing at all, was standing in one of those checkout lines, and you had to predict which one, based only on knowing how many people were in each line."

"There'd be no way to know."

"But inference is about probabilities. And the most probable outcome, obviously, is that he's in the line with the most people in it." Once you step back and consider yourself from an outsider's perspective, it becomes self-evident. The slowest traffic lane is the one with the most cars in it. The laws of probability say that any given driver is most likely to be in that lane. That means you. It's not bad luck or delusion that makes you think the other lanes of traffic are going faster. More often than not, they are going faster."
Great quote from a great book, The Ambler Warning by Robert Ludlum.



If you haven't read it...you should.

The book, while not about investing or the market, contains two fictional characters who fit well with characters in the investment world. One of the characters lives by gut feel alone. Instinct. The other...100% logic, statistics, probabilities, just the facts ma'm. Interesting to see the development of these characters and how they find common ground.

Later Trades,

MT