I realized while studying physics that at the most fundamental level, we have no idea of absolute reality, or if the concept even has any meaning. We make our best informed guess as to what is going on and how, develop, test, and refine models, see results, and sometimes change models or find others with better predictive value.
Models have varying degrees of complexity and specificity. Some are scientific, some unscientific, some a blend. Our “feelings” about the markets, the economy, and government constitute a sort of model.
The ultimate value of a model is predictive success, andbit need not reflect “reality” in order to be highly successful. Early earth-centric models of the universe that described the motions of the heavenly bodies in terms of increasingly numerous cycles and epicycles are now seen to be inconsistent with modern observations, and of inferior predictive value in a post-Copernican and post-Keplerian paradigm, where the circle is no longer considered to be divine and the sun is considered to be the center of the system—but for a great many years those early Ptolemaic models had superior predictive value compared to early versions of the new models, although they were a great deal more complex and cumbersome.
I have no claim on “market realities “. I do believe that there have recently been fundamental changes in the system that render older models less valuable, if not obsolete—but people have been arguing this for many decades. Early in the last century, debate raged about the rationality of the markets, and the debate has never been resolved.
My model, such as it is, has produced excellent results, by my estimation. I have consistently out-performed aggregate markets, for decades. I am adaptive and humble, and I realize that, like the Darvas Box, my model might really only work well in bull markets—in fact, it did best back in the frothy days, and I had to make significant changes to my thinking to keep things working, some of which ideas I have described in this thread. I freely admit that there some events potentially outside the scope of my model’s predictive ability, like the upcoming fed election.
I will probably sit it out, and miss out on some gain, while those with more appropriate models will benefit.
The question should not be whether I am right or wrong overall—a better question is whether or not I have been able to predict events and act on those predictions judiciously in order to benefit from my actions, over a reasonably long period of time. The answer is yes, because I don’t get cocky about it. Fear is my ally.
Information is important. Look at the numbers today—private payrolls, lmao. Want to ralk U1-U6? Seasonal adjustments to mfg numbers for part-time holiday wreath makers? Etc. One must know when to call bs, and why the bs was publicized and how it is being used.
I know some things, and some people, which give me my own perspective. YMMV. What I do has worked, for me. Ever look at an Italian master plasterer’s toolkit? What a bunch of CRAP, inferior to even a loose collection of Chinese tools from Menard’s. But look at what they make with it, because they are the ones handling it—sheer beauty.
This is why I always wish everyone good fortune (except for offensive, arrogant, dogmatic morons like Flagpole), because the joy is in discussing things, in interplay, in making everyone better, in recognizing that adaptation is a daily struggle. I enjoy nothing better than someone’s success that I didn’t have, because I can learn from it—and sometimes I learn valuable things, not only from those who do better than me overall, but also from those who do worse, but have individual triumphs on which I missed out.
The least interesting are those who just swim with the current, and who are essentially passive. They have zero alpha, and zero to add.
Having said all that, markets on track for good gains going into the weekend!