Focus On The Facts… – ValueWalk Premium
Billionaire money flows

Focus On The Facts…

One of the great benefits of writing this blog is that I get hundreds of emails each month. These emails give me a unique perspective into what others see and an insight into how they run their books. With that in mind, I’d like to explore an odd concept in finance—investors’ political views getting in the way of them making money.

Q1 2021 hedge fund letters, conferences and more

Billionaire money flows

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As our world gets more politicized, investors are increasingly trapped by their own personal political opinions. I want to be blunt; it really doesn’t matter what you want to happen, it doesn’t matter what you think the government should do and it doesn’t matter if you disagree with the course of action. The only thing that matters in investing is guessing what WILL happen and then riding that wave.

The most perfect example of this is Trump’s bull market. Look, I don’t care if you like the guy or not—it literally doesn’t matter. The man told investors that he had their backs. For four years, he reminded you every single day that he’d be tweeting the market higher. He showed up in the morning, pointed at the fence and promised you a grand-slam. It didn’t matter if you believed in his policies or not—all that mattered was that you accepted that he could somehow muscle the market higher. Say what you want about his presidency, he went out on the high tick as promised. Meanwhile, many investors let their emotions get in the way and missed out on a great bull market.

Let’s look at another example; by late March 2020, the data said that COVID was, at worst, a bad cold. Now, you could cower in fear listening to the news, hiding from germs like Howard Hughes or you could analyze the data. I get it, we all know someone who was badly impacted by COVID—many of us know people who died of COVID. That’s all horribly unfortunate, but humans have a bad habit of focusing on personal anecdotes and ignoring hard data. Had you focused on the actual facts, even by late March, it was obvious that COVID was the sort of bad cold that comes around every decade or two—certainly no pandemic. Oddly, the only true pandemic was a pandemic of political incompetence. Once I looked at the data, it was obvious that public perceptions of COVID could only get better, leading to a massive recovery—hence why I could size-up and know it was a limited risk position.

Moving onto the present day; let me state the obvious—I’m a libertarian hard money type. I’m disgusted by what is happening right now. MMT is anathema to me, as are recurring “stimmies” and Fed monetization of debt. I could hoard my Kruggerands and moan about doctored government inflation data or I can go out there and take advantage of the situation. If you’ve read me for more than a few quarters, you know that I’ve put my prejudices aside, suited up and rode the money printing wave with the best of them. How was I able to do this? I recognized the situation, anticipated where we were going and strapped on exposure. I didn’t gripe that this would lead to ruin. I didn’t try and fight the trend. I simply recognized reality and got exposure to what was obvious. Oddly, many of my friends continued to short “Project Zimbabwe.” They’ve been worried about all sorts of nonsense and they’ve lost the story line. Since they disagreed with the government’s path, they effectively disagreed with the market. As a result, they’ve missed the greatest 12-month bull market of my career.

In all of these situations, the outcome was incredibly obvious, yet amazingly, people let their emotions and political opinions get in the way. I want to repeat this point again; this investment game is easy—especially as the government has hijacked the free market. The government always tells you what they want to happen. The government often fumbles the ball, but they usually overpower the market when they put their mind to something. You can listen to their plans or you can ignore them, oddly people continue to fight the market. Why do so many unusually brilliant people keep letting their emotions fight their wallets? Why not just put prejudices aside and make money?

Right now, the Fed is literally telling you that their goal is to create inflation. Throughout history, weak governments have failed to avoid inflation. This unusually weak government is complaining that they’re not creating sufficient inflation. I suspect they succeed beyond their wildest dreams.

You can disagree with their goals, you can disagree with the plan, you can disagree with the process, but if you’re not front-running what’s coming, what are you doing? Stop letting your emotions get in the way…

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Article by Adventures In Capitalism

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