Common Sense

The markets defy all Common Sense. Occasionally, some idiot will argue with you about that, saying it makes perfect sense. Then it will go against them after time. Ironically, that statement holds the key to regular profitability, no matter what, defying all common sense.

So why don't we exploit Common Ignorance? Make a perfectly ignorant trade, defying all common sense, and then hedge it, but with an equally ignorant trade, balancing either partially, excessively, or completely the other side ignorant trade. What could happen from that? Well, experience shows that it is generally profitable, and the more ignorant the components, the more profitable. Welcome to Hedge Fund 101.

Hedge funds charge a lot of money for being really ignorant. It is the last thing anybody would think of doing, so they are pretty safe there. They have no shortage of the other side of their trades  because they are doing exactly the opposite of what Conventional Wisdom says they should do. There is no shortage of Self Appointed Genius out there, and we are their Idiots giving away Smart Trades willy nilly. They don't know we have it all hedged, plus we charge them time through a management fee. Hey, we may be sto0pid, but we aren't crazy.

This one started out 4 years ago with $20K. It has been pretty ignorant since then.

I could show you the ignorant components, but then you will run off and do something really ignorant. You will be a victim of your own common sense. It is there for the taking, so you would have to be an idiot not to grab it and use it you would think. But these times are different. For what It is worth... there might be an actual return to something that makes sense! I'm not holding my breath though. It is like waiting for an earthquake. Everybody knows it's coming, but when is a different matter. You can be prepared for it like Fukushima was, only to discover exactly what you didn't know about earthquakes. You would have to be ignorant to have power plants and fuel ready to go on the roof before that. Well, guess what?

Brokers like to protect you from being ignorant. It is criminal if they don't. It is right there in all that boiler plate. Good thing too, because they would not be able to operate without taking the other side of all your smart trades, always being right there to be ignorant. When a stock becomes Hard To Borrow it is likely because they have snapped up all the remaining borrowable shares of it. One doesn't have to look hard to find these. They are the ones with a high valuation that they declare hard to borrow as opposed to ones less than $4. That is because they are preparing to be even more ignorant than you when the Big One comes. They know the most ignorant bastard is the last one standing, and someone has to turn out the lights.

Proxy shorts will be like that. You could hold a boatload of Short ETF's and still lose out to the tsunami of volatility that comes with the nosedive. Some ignorant bastard will likely be short of all that hedged against a short position of the corresponding long side ETF, constantly giving up the contango from each side. Ignorantly, they might backwardate and both be winners for once.

So get out there an' get Ignorant, but hedged of course! You could still fall prey to having two opposing wrongs not being right as can happen, but generally when hedging, two opposing wrongs don't make a right. Instead they make a profit.