Greatest Trade Ever
It is the end of the year and crisis or no crisis sycophants and foxhole investors are back at what they do best..Witness this precious piece from Gregory Zuckermann in WSJ on John Paulson’s lessons. The ignorance and the lack of polish shines through in another woeful attempt by a media person and countless ‘investors’ or shadows thereof. So i felt bound to finally take the plunge and make matters right. You see, this is not how the Greatest trades were made. ( Link to the article is really superfluous, you can meet umpteen such articles in the financial media and even find ranches in Texas that would hold dinner galas spouting much the same philosophy.)
However, the book is here and this does not claim to be a book review [AMAZONPRODUCT=0385529910]
Still Another Digression: (S.A.D.#9-1-1) There was that ‘ranch’ in South California too, but that’s been taken down in full after the 30 year OSA veils were lifted, Scooter Libby and others awakened and all the rest. And for investors outside the US, the same holds as we are all following the same crisis; the next tipping point for reforming the way financial markets and the budget for our home and hearth are run much the same way too.
1. Listen to your experts : And this is serious. The man who says the crisis teaches us to “Don’t rely on experts’, he s just taking time off to be a papa stooge. The experts not only have an edge on the information, they also have a ‘record’ behind them. But yes, don’t take one source for granted, be sceptical, trust your judgment
2. Bubble trouble – True. Everyone doing the same thing at the same time changes things. But the tectonic shift is not necessarily better always, or bad OR Black Swan either..and don’t ever use your nest savings..we are never even talking about it. Better still, for this take advice #1 and add to it..Dine with your experts..take an evening walk in the park with them, and don’t forge to be nice to them. This one also is not the excuse to shout and scream like Osama bin Laden, nor does that make you and your investments any better – or grade worthy – or worth selling low and buying high 
3. The Contrarian point – is a studied viewpoint, not an allergic reaction to the expert’s makeup and Maria’s sartorial and travel lifestyle ( as ‘reported’ on CNBC. Drink it in with beer at dinner and wake up in the morning to drink another coffee..raving and ranting is counterproductive to gray cells..not the drinking
4. Focus on Debt Markets – That is a great lesson from this crisis. In fact that would even give us some breathing space when we try to avert the next crisis. There is an imperfect natural hedge there, and it saves us, esp when everyone starts thinking of OIL and GOLD too..those times or in a normal economy bubble or ultra mega size bubble, you need to see that the debt is at any time no less than 5 times the size of the entire Global Equity market investments and that is a lot, in fact what went out of equity went to bonds and then it will come back from there too..
5. Master new Investments – On the dot. Exchange Trading Funds are a good idea. Publicly traded debt in india, China and the N11, G8+3 not so much. So here, listen to more than one expert. Read us here. and don’t feel like Bruce Willis in Die Hard, Make the calls and ask around. That gets any thoughts of crises from developing, esp not overnight and not a crisis of the household budget
6. Use Derivatives to your advantage: Getting that safety net in place is harder to do with just CDs and real estate. You need to balance the equation more than once every year. Realign to a new fact or facts. Don’t sit on it. and then making a jump to new products is easier, and the ill-informed salesperson is unable to fool you into buying unsecured, unpayable. ETFs are a great place to start.
7. Reconstruction is the key. So is infrastructure. Keep your eyes open. 3 out of 5 ETFs are going to fail. Derivatives by their nature are going to leave someone stranded again. It will happen. So will real estate, and Lehman Bros. and in fact next time the cash buried in the backyard would not be safe either. Get used to a little higher risk. start small.
8. Experience counts. On the dot. But hero-worship kills, indiscriminately
9. Luck helps? See 1 to 4 above and redo the equation . Talk to us. Talk to your neighbourhood broker. All investment classes are inherently the same once you have figured them out. They make money if they are right. and if they are right they work for you. and your friends.
Paulson made his greatest trades after he had made a few winning trades every year. that is the only thing to learn, rest is the debate..and hating the experts is only handing America’s markets to the Osamas of the world..
Also if you are a corporate denizen, take a lesson from the lady that failed to catch Cadbury and her investment bankers..you go in with only one price and you come out empty handed.
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