Taking Inventory

May 10th, 2016|Featured, Philosophy|

Let's delve a little deeper into your situation in the negative sum game.  Most individual traders are very myopic.  They think about the great “tools” they have with respect to their trading.  But what they should actually be thinking about are their tools relative to everyone else’s tools.  It’s a negative sum game!   The Competitors' Edge in a Negative Sum Game Take a step back and look at the battlefield.  Is what you have any better than anyone else’s?  The answer is “probably not” (vs anyone who matters).  In fact, from the previous post, you should realize that what you [...]

The Corollary to the Fundamental Truth of Trading:

May 5th, 2016|Featured, Philosophy|

For you to do well, someone else has to do poorly, relative to the benchmark.   It is a negative-sum game after all.  I am not going to touch “have everyone do worse, so I can do better.”  I suspect there are probably some prominent people out there who do this, but not enough to warrant spending more time on it than I already have.  So let’s just look at the game from a “be the best you can be” perspective. The major players. The next logical step is to look at the lay of the land, and figure out [...]

The Fundamental Truth of Trading:

May 5th, 2016|Featured, Philosophy|

Trading is a negative sum game, relative to a benchmark.  The Fundamental Truth of Trading is definitionally true for trading futures.   The benchmark for futures trading is zero.  For someone to make money, someone else has to lose money.  This would be a classic example of a zero sum game.  Trading futures is a negative sum game because of all the transactions costs.  If there were no transactions costs, and you added up the money made and lost trading futures by all participants, the sum would be zero.  My estimate is that there are over 3x as many losers as winners [...]

Winter is Coming

April 4th, 2016|Economy, Featured|

My first job after college was working at a management consulting firm.  Consulting interviews would feature “hard-to-quantify” questions like “how many tombstones are sold in the US annually?” or “what would you guess Coca Cola’s various expenses were as a percentage of sales?”  They would typically give you about 10-15 minutes to work through the estimate and discuss the rationale.  The reason for this line of questioning is that part of the job is developing estimates of hard-to-measure drivers.  Some people call it “making up numbers,” but tomato-tomahto.  Here is my estimate for the impact of Baby Boomers on the [...]