Investing with Coyote

In short, don't ever ever ever take my investment advice.  However, I will note that when I tongue-in-cheek called the market top on May 27, the S&P closed at 2123 and has not closed higher than 2128 since.

The reason market timing is virtually impossible is because the actual timing can be so skewed .  You can be sure the market is overvalued but it can take years for that to play out, particularly when governments (e.g. US, China) are pumping liquidity into the markets to keep them afloat.

A good example is China.  I (and many other much smarter people) were recognizing the China market was overvalued years ago, but had one shorted the China market back then you would have been short-squeezed into oblivion before the actual crash came about this year.

While fundamental investing isn't worthless, the effects of fundamentals seem to get easily swamped by government actions, such that predicting government actions is far more important to investment success than figuring out corporate fundamentals.  I learned to tear apart company financials from one of the best back at HBS, but I have no ability to figure out when the Fed will or will not stop dumping money into the markets.  So I buy a few index funds and try not to look at them too much.


  1. J_W_W:

    The Fed stop dumping money??

    The answer is now that the Fed will never stop dumping money into the markets, they also will never raise interest rates again.

    The market is such that its reaction to either of these actions by the Fed will be a massive crash. Even hints about raising rates or stopping QE lead to market drops.

    We are in this trap now and there is no way out..... Well now way out but down, way down.

  2. Shane:

    LOL Coyote haven't you heard the saying "The market can remain irrational longer than you can remain solvent."


  3. Matthew Slyfield:

    "the effects of fundamentals seem to get easily swamped by government actions"

    Not to mention short term fads like the one that drove the dot com bubble.

  4. awp:

    On Dec 12th 2011 the Shanghai Exchange Composite Index closed at 2360.664
    On Sept. 18th 2015 the Shanghai Exchange Composite Index closed at 3097.92

    Not much of a good call on a crash if I could have earned an annualized return of 7%

  5. mesaeconoguy:

    Do not feel bad Warren, I had Old Yellen at +25 bps yesterday.

    Nobody knew.

    On the other hand, if we had actual economic forces to contend with, and actual economic progress and wealth creation, then I would very much like to invest with you/alongside you/run your hedge fund.