Casper David Friedrich’s 1818 oil painting, Wanderer Above the Sea of Fog
“As a practitioner of uncertainty I have seen more than my share of snake-oil salesmen dressed in the garb of scientists, particularly those operating in economics.”
— Nassim Nicholas Taleb, Fooled by Randomness
Trading options is to practice uncertainty. The painting above represents my view of work each day.
The characteristics of a successful trader are: knowledge, discipline, courage, and hard work.
Then it’s up to luck.
Options Hotline is in its 31st year of publication, helping sensible speculators vie for fun and profit by providing specific, actionable information and recommendations.
Subscribe today to join our readers, navigating uncertain markets and staying a step ahead of the crowd.
“When it comes to the overall stock market, there are only 2 fundamentals that matter. Forget book value, div. yield, PEG, etc. The 2 factors that matter are:
1. How much money is there?
2. How much does that money want to be invested?”
–Tom McClellan, @McClellanOsc
Central banks have been vigorously pumping up their balance sheets, with liquidity flowing into stocks. We shall see what happens when the flow slows and the river begins to dry.
Illustration of the fools of Chelm, by Maurice Sendak, in Isaac Bashevis Singer’s short story, The Snow in Chelm
“The difference between being very smart and very foolish is often very small.”
— Amos Tversky
“Remain calm. All is well.”
— Animal House
Fed Chair Jay Powell, pictured above, discussing the NY Fed’s repo actions and growth of the central bank’s balance sheet, during Wednesday’s press conference.
“I’ve always felt ideas were a dime a dozen. If you had one that didn’t work out, you should not fight too hard to save it, just go find another.”
— Daniel Kahneman
That can be applied to trading. Examine your decision-making process.
As a general rule, never add to a losing position. Hone your money management survival skills, so that inevitable losing trades don’t knock you out. You want to be there to reap the benefits of your big winners.
After all, there’s always opportunity in options.
PS Check out Michael Lewis’ The Undoing Project, about groundbreaking psychologists Kahneman and Tversky.
Operation Repo h/t IMDB, EGA Productions
“All the oil experts from the weekend are now repo rate experts.”
— Hipster, @Hipster_Trader
The repo news isn’t about automobiles. It’s about the beleaguered US Federal Reserve and their large overnight liquidity injections into the financial system.
We wish them Godspeed and good luck, as they try to thread the needle while pushing on a string.
“This is hard to accept in the Age of the Internet. It has been very hard for me to explain that the more data you get, the less you know what’s going on, and the more iatrogenics you will cause. People are still under the illusion that science means more data.”
— Nassim Nicholas Taleb
Understanding this concept may benefit you in regards to your trading, as well as your health.
“In maths, 10 x 1 is always the same as 1 x 10, but in real life, it rarely is. You can trick ten people once, but it’s much harder to trick one person ten times.”
— Rory Sutherland
h/t Jim O’Shaughnessy, @jposhaughnessy
It’s good to be back from a wonderful family celebration in New York. After all these years in California, there’s still just a little New Yorker left in me.
The Trade War Cycle h/t @StockCats
h/t Stockcats, @StockCats
Rinse, repeat. Around we go. Markets ramping up on hope for US/China October trade talks.
See cycle above.
SUBSCRIBER NOTE: We’re out of the office ’til Tuesday; headed east for a wedding, to celebrate with family. I’ll broadcast our Midweek Outlook on Wednesday, 9/11/19, with next Options Hotline scheduled for Sunday, 9/15/19.
“The legacy of negative interest rates. If I pay you to hold my money, I am declaring my money unsound. The gold price agrees.”
— Chris Carolan, @spiralcal
The fact that investing in gold doesn’t pay interest has been a strong argument against the Midas metal for ages. But the spreading of calamitous negative yields, as sovereign nations apply beggar-thy-neighbor policies to push on a string and debase their currencies in hopes of spurring slowing economies, sparked gold to reach 6-year highs earlier in the week.
We shall see if there are any winners in the race to the bottom. Gold is affirming its historic role as a store of value.