As you will recall, a pair trade is a trade that goes long a single facet and quick the other with the idea of capturing the difference in functionality. Yet another way to frame my current preferred pair trade is “Wisdom” vs “Emotion”.
It is my speculation that a species’ evolutionarily profitable emotional responses are codified in DNA as instincts. We also know that marketplaces punish herd conduct, since the herd can be spooked, and therefore trustworthy to overreact in times of peak agitation. This is why I like to evaluate volatility and explain it with figures in these kinds of a way as it is each stable enough for continuity and nevertheless adaptive ample to respond to alter in accord with deeper developments which are evolving beneath the surface of immediate observation
In this pair trade Buffett performs the part of wisdom, the protoypical clever uncle who has observed it all, and is aware of how to frame the difficulty and navigate via uncertainty. The most recent, best ETF, the metaphorically exuberant youth in search of riches in the land of milk and honey, is represented by EEM (the emerging markets.
There is a time for each in human life cycle, in the passing of seasons, in the biking of marketplaces. Would we actually say that the exuberance of youth must be reduce out of our daily life and expertise? exactly where would the ventures arrive from? www.hoanghaivan.org ? knowledge is not every thing, but it also has its time and area.
Just as we can develop and mature our judgement, so to can we carry various values and insights to bear as the market place morphs around us.
This is obviously Buffett time, even so you slice it.January 23, 2020