In the stock market, there is a distinction between Alpha, which is earned from other active traders, and Beta, which is earned from buy-and-hold investors. When a strategy exploits "documented behavioral bias" or "institutional rigidity" it means that somebody is losing money that you are making. You need to know who those people are, why they are doing it and monitor that they keep doing it. Without a theory the only way you know your strategy stopped working is when you lose money, you never have warning, and you never know when it's safe to go back to it.
Pic: Feria de Revistas that met in Plaza Rivadavia, Buenos Aires, every Sunday morning. We boys extended the comics on the floor while others circulated with their trading stock in hand. First editions vere very valuable and I always ended the day with a more valuable collection than I brought to trade and also some cash. In the process I read every Selecciones del Readers Digest from 1945 on. Remembering it, I feel sadness and nostalgia.
2 comments:
I'd really like it if you could elaborate on the idea you learned from Mr. Quesus.
Russ
It is simple. We are all trying to carve out a piece of available resources. If I grow rice in a previously wild land, total available resources will be larger, but I still need to sell it (exchange it for other resources). No one is guaranteed anything, there is no "just price" or "just salary". If I sell my rice at a good price, the buyer is buying it at a bad price for him. Everything you put in your pocket comes from the pocket of somebody else, who could well use it.
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