It hasn't learned, is there any way to make it play itself?
That's the line from War Games where the computer is about to launch a nuclear war because it thinks it can win by striking first. They put the computer into a loop playing tick, tack, toe so it can learn that, no matter what it does, there are some games that simply cannot be won. I was fortunate enough to see this movie when I was young and we really did think Reagan might start a war any second so this is one of those vivid memories that probably helped form my trading consciousness.
Ultimately, the supercomputer realizes the futility of taking action and says: "Strange game, the only winning move is not to play." This is a very difficult concept for the average trader to get their head around. We like to trade, if we are not trading then we are not traders – what would we be if we just went to cash. The answer to that is – Investors!
An investment is the purchase of a financial product or other item of value with an EXPECTATION of favorable future returns. Expectation does not mean 50:50, item of value does not mean a short-term out of the money contract that will be worthless at the end of the month. If we are not at least 80% certain that we will get a favorable future return of 20% then we are better off not playing right? OF COURSE RIGHT!
Goldman Sachs says there's going to be a recession in Q1 and Q2 and you can't argue with Goldman because the fact that they are saying it causes it. You're not going to be wrong when you directly control over $3T in assets and indirectly influence the movement of Trillions more, especially when your ex-CEO is the US Treasury Secretary and another ex-CEO is the Governor of New Jersey while another (Andrew Alper) is a former GS partner who is Presiden of the NYC Economic Development Corporation. So please folks, if GS says there's a recession, not only are we in one but they are already profiting from it!
Forbes jumped on the recession bandwagon and it hit the USA Today as well and, while I still feel this is a massive, coordinated effort to "foment" a panic ahead of action by the famous Plunge Protection Team, the fact is I'm not 80% sure of anything. I'm not 70% sure and I'm barely 50% sure but I think that's as unsure as you can be so that means that unless I am investing in things that are going to, on average, return 50% to me with near certainty, then I am better off not playing until I become a little more certain of direction.
That is my advice for today, or lack thereof!
As John Lennon would have said if he were a capitalist: "All I am saying, is give cash a chance." If we can't hold 1,400 on the S&P do not delude yourself into thinking things will get better any second, this can go on for months. Once a trend is established, up or down, there are wonerful things we can do with cash but, as an investor, the prudent thing to do is to wait for clarity.
