STREET DOGS: Don’t live on the extremes
Cullen Roche says that, like most things in life, the best place to be is often somewhere in the middle
From Cullen Roche at Pragmatic Capitalism: There’s a strong tendency in the financial markets to live in the extremes. We often draw a line in the sand. You’re either bullish or bearish. You’re in or you’re out. But like most things in life, the best place to be is often somewhere in the middle. Living on the extremes results in extreme and oftentimes irrational outcomes. Anyone who’s taken a strong directional bias against the S&P 500 in the last few years, for instance, has obviously made a very bad decision. The whole permabear perspective based on the idea that QE [quantitative easing] was going to lead to inflation and an irrational stock market rally has so far proven to be wrong. The problem (with this way of thinking) is that it has resulted in a permanent bearish position that has been highly destructive. It’s fine to be bearish at times. It’s fine to hedge. It’s fine to underperform the S&P 500. But when you take a permanent bearish directional bias on life and the markets...
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