Market Anthropology: Darkness on The Edge of Town

Tuesday, May 17, 2011

Darkness on The Edge of Town

With all the chatter about recent 13F filings from various market titans, it got me thinking; 

Why do I rarely read more than the headlines or first few snippets?

It may come off rather cavalier and arrogant, but what a too-big-for-their-own-good hedge fund manager did 45 days ago (likely even much longer) is irrelevant to how I am managing market expectations as a trader today. 

It’s driving using the rear view mirror for perspective. It may give you some reassurances that you are headed down the right road – but you are still facing the wrong direction.

There are two parts of logic here at work. 

A. It’s a dynamic market environment. I want to be reading the tea leaves for June – not March. Granted, the best fund managers are typically ahead of the curve and reflecting that posture in their positions, but the second part of the equation often get’s in the way;

B. Size and ego. These guys typically don’t like to pivot until the market has proven them otherwise – sometimes violently so (Eddie Lampert’s accumulation of Citigroup in 2007 comes to mind). There’s far too much at stake (collectively) to break thesis mid stride even if the market starts humming a different tune.

In today’s market climate, a month and a half in the dark might as well be a year. 

(Positions in TZA & UUP)


I just joined Twitter, you can find me here. All my trades and occasional market musings are disclosed in real-time through Twitter. 

Disclaimer: This is not investment advice. Always do your own due diligence. Erik Swarts is not a registered investment advisor. Under no circumstances should any content from this website be used or interpreted as a recommendation for any investment or trading approach to the markets. Trading and investing can be hazardous to your wealth. Any investment decisions must in all cases be made by the reader or by his or her registered investment advisor.