I got an email from a Swedish lets say “broker” with “stuff” an investor “should” know about before the market opens today:

(bold and underline added by me)

“After a strong recovery and closure in the US, there are positive tones in the market.

High volatility, rapid declines, company reports, Fed announcements, negative gamma is, to say the least, a difficult-to-analyze cocktail regardless of the type of analysis method used. During these periods we are reminded of the importance of a thorough process and strict risk management.

Increased risk aversion in the market is usually a process. It is not an event, although it can feel like an event when one’s own positions take a beating.

What has happened lately?

10/12: Bitcoin (measure of risk appetite) switched to #BearishTrend
7/1: Risk On vs Risk Off ratio broke down in negative territory
10/1: Nasdaq switched to #BearishTrend
14/1: Fewer than 50% of the companies on the Stockholm Stock Exchange> MA (200)
18/1: S&P 500 and OMXS30 switched to #NeutralTrend
21/1: VIX switched to BullishTrend
24/1: S&P 500 switched to #BearishTrend

#NeutralTrend is a standby time used as confirmation. Volatility must also increase for the trend to turn into #BearishTrend. This is to avoid false signals. Furthermore, gold and silver have shifted to #BullishTrend in January. Now I expect a lower peak in the 10-year interest rate in the US. Is still negative to what is traded in #BearishTrend. On the corporate front, in today’s video I highlight a company that trades in a sector that ranks high on volatility-adjusted price momentum.”


… Now I don’t pay attention to any of this as it relates to if I am buying or selling. I continue to hold and buy companies that I think are Priced less than they are Worth and vice versa. That’s it. I only look at what I know about the micro and what I expect from the micro (company) over the next 12-24 months lets say.

But this email blast got me thinking just how much friggin noise (IMO) investors are taught to pay attention to. Lets say you find a company that is dirt cheap, but because 7 out of 12 “macro factors” in an email like this are considered bearish, you might hold off on buying. So I am walking away from something that in reality has say a 80% chance of delivering me a 50%-100% return sometime in the next 12-24 months because lets say “negative gamma” pushed the amount of bearish macro factors from 6/12 (neutral) to 7/12. It’s just a bunch of malarky in my book.

But then again the more (IMO) technical & complex noise factors I could get people to pay attention to the larger their perceived need for me as a market commentator. If I make you believe that gamma,  VIX and the percentage of companies trading over 200 MA is very important for you then you have to follow/subscribe to my services if you can’t keep track of those things yourself. These might all be “interesting details” but they can still be totally worthless for YOUR investing strategy…

Mean  while it is my personal opinion that one should keep it as simple as possible and focus on as few factors as possible in order not to get sidetracked by noise. It’s hard enough to find a winning strategy and the more noise that one gets exposed to makes it hard to stick to it. I think an investor pretty much only needs the following to do well over the LONG TERM:

  1. Value investing approach (Just focus on specific companies aka stock picking)
  2. Have a lot of patience and a 12-24 month horizon or more
  3. Use and stick to common sense
  4. Realize that sentiment dictates a lot of the movements in the short to medium term
    • And value investing accounts for this automatically since low sentiment coincides with a larger Price-to-Value gap

To sum up:

If I can find companies that will PROBABLY create say 50% more value over the next 24 months then things will turn out just fine in the long term regardless of what gamma, schmamma, yamma, VIX, KIX and TRIX are saying right now. Macro noise is interesting to look at but in my opinion almost worthless. What macro is worth noting is that we dig up a lot more gold than we find each year, that central banks print more money than ever before in history and that the current FIAT system is unsustainable… Hence why I like gold. Gold miners just happens to be incredibly cheap right now as well…

Oh and I think it is way easier to have a firm grasp whether a company is cheap or not than to have a firm grasp of what the “net meaning” is for 30 “market technicals”.

Note: Not investing advice. Do your own due diligence.

Best regads,

The Hedgeless Horseman

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