Too Close for Clarity

An interesting thing seems to be taking place in the markets these days. The "obvious" trade is the one that's playing out. With all the complex tools and trading strategies/systems out there, the strategy  that's ironically winning out is one that a 3rd grader could identify and execute- that of using a ruler to find a trend and just buy, buy, buy. First order, surface-level data is all you need to make some dough in these markets. Just plough your 401(k) into the Growth Fund of the day, and viola, you're up 30% in a few quarters!

With the Nasdaq and individual stocks on a tear, why in the world would hedge funds and other traders have issues making money these days? Ok so those of us who have been keen observers of the the markets know that it's not that simple, in spite of what the expectations of benchmark comparison-hungry money allocators may lead you to believe. Hedging, resistance zones, tail geopolitical risk, and general disbelief of those who have been at this for a while are making "sophisticated" investors look pretty dumb. Shame on you for buying portfolio protection or staying out of a multi-day run at the top of a decade+ bull market in the middle of a presidential impeachment with no clear trade deal on the horizon and North Korea threatening inter-ballistic missiles that might reach the U.S.!! Sorry for the run-on sentence; there are just too many things to speak of that make this run implausible.

But then something interesting happens when you take a step back from the clutter of information that could influence the markets. You start to see the obvious. The obviously trending markets. The obvious low volatility. The obvious "wall of worry" playing out. The obvious squeezes taking place in stocks like TSLA and AMZN (today).

This leads me to the following question: are we humans wired to hunt for answers, to search beyond the surface, to...peel a fruit before eating it? Is that why the most obvious things in the news regarding issues and politicians just don't register in peoples' minds? It's almost as if we need added complexity or a conspiracy behind the most obvious things to make sense of it. After all, prey didn't just show up at the doorstep of our ancestors' caves; they had to go out and use their brains and bodies to find and kill them.

This is yet another reason why trading requires a re-wiring of ones perspectives and thinking; sometimes "dumbing" yourself down to accept the obvious can be the best thing you do in times like this, where the most obvious things are right in front of us, but we're too caught up in having to go fishing with complicated lures than to make money by just shooting the proverbial "fish in a barrel".