Sunday, June 9, 2019

A New Theory of Investing

Here is a new theory of investing, inspired ny the libertarian belief that all government intervention in economics fails: try to guess where the market would have been, and then invest on that. In theory, eventually every government runs out of Other People's Money: the Fed can't drop rates below zero, there is a limit to how much money can be printed before inflation renders the currency worthless, they can only tax so much before a revolt. When the government fails, in theory your investment will make money. In an economic boom fueled by artificial manipulations, invest in a recession, or vice versa. Two objections can be raised: the government won't run out of money before you do betting against it, and your guess can only be mere conjecture with no proof in real financial data (because the "real" data comes from the Fed-manipulated economy). Both true. But for growth investors seeking a competitive edge against the efficient market, this a path--a risky path with no guarantees, but a new path, one which most other investors will shun. A government cannot create artificial prosperity forever, the only question is when the hammer will drop and on what, to correctly target your short sales and put options.