‘Management’ vs. Prediction

My ears start to bleed when I hear someone who has staked a claim to the mantle of guruhood definitively state something – especially in the realm of technical analysis – as if they have used esoteric and mystical methods in service to divination of answers yet to come, and then put it out there as if it is anything more than an educated guess.

It is not ‘the answer’.  It is just a guess based on the guru’s best methods.  His followers want to feel as if someone is in control and the guru is only too happy to provide this unattainable aspect of the asset markets… CONTROL.

The trick for our dear guru is when he is inevitably wrong and must backtrack.  Some just issue alarmingly bearish analysis and then when perceived to be on the wrong track, issue alarmingly bullish stuff, creating a bipolar sort of experience for whipsawed followers.

Others hold the line, expecting that their calls will be right one day if given enough time.  ‘Everybody’s losing money, after all’ was something that I heard throughout the ‘resource stock’ sector last year.

Well no, everybody was not losing money.  People managing markets in service to risk management (as opposed to ego) did just fine.

Anyway, this post goes up after I looked at my account and shook my head almost in disbelief that the speculative portfolio is still +7% for 2012.  This despite my continued bullishness on gold and yes the gold stock sector.  I almost feel that as a gold stock bull, I should be fearful and racked with pain instead of opportunistic as I do now.  But my own methods saved me from this ignominy.  I find control through knowing I do not have control and thus, effectively manage.

I have received emails from NFTRH subscribers saying things like “just sitting and waiting to…” and “I am 70% cash and looking to…” that let me know I am doing my simple job, which is to analyze the markets to the best of my ability, illustrate the risks and opportunities and manage week to week within a bigger picture framework.  I have had to make adjustments many times because I am just a human, who knows nothing more about what markets will do than the next human (well, the next human with extensive market experience, anyway) knows.

Nobody knows what is going to happen in the markets.  Nobody, especially those that make a handsome living pretending that they have some sort of secret contraption into which they peer to divine the answers.  It is all about grunt work and management.  Have a plan and plan to be right, but when risks increase that the course is wrong, GET RIGHT immediately.  No if’s, and’s or but’s.

‘Management’ wins, because it adjusts as needed.  Really, the way many people go about markets is pretty immature.  There is long tradition of ‘stock tips’ and lust for an inside scoop.  This ‘scoop’ generally does not exist however, unless you are a ‘too big (or too crooked) to fail bank’ being spoon fed by the Federal Reserve and the citizens of the USA.

Regular grunts need to do the grunt work.  Hard work and a sound psychological framework will allow you to manage through anything.  I’ll have to do a post on psychology sometime* as well, because having the psych element nailed down is key to the all-important taming of bias, which keeps people from adjusting as needed, which keeps people from effectively managing the markets.

You see?

* Reference this previous post, which ties in effective management with the effort to maintain a sound ‘psych’ profile in the face of dynamic events.

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