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Legendary investor Bill Gross just trashed the world’s central bankers again…
All props to his consistency!
In his latest investment letter, Gross accused them of turning financial markets into a casino thanks to their reckless monetary policies.
He charges that insanely low rates are demolishing the very business models that have provided the savings and investments that have historically propelled our economic growth.
And it’s also led to investors “scrappin’ like mongrel dogs for tidbits of return at the zero bound.”
This has created an untenable situation that Gross believes “cannot end well.”
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But the truth is it can end just fine if you’re a trend follower…
Deeply Distorted Markets
Look, Gross is right. Through zero rates and focusing on creating a “wealth effect” through artificially inflated stock prices, the Fed and other central banks have destroyed the normal functioning of financial markets.
They are no longer capitalist enterprises driven by supply and demand and business cycles. Fire and ice casino. They’re disconnected from the real economy.
Trying to figure out how to invest and trade in this environment is like a crapshoot. You’re trusting your hard-earned money to simple dice-roll chance. And like all casinos, the odds aren’t in your favor.
Sure, the casino loses occasionally to entice you to keep betting. But the house wins—period. Where do you think they get the cash to build all those fancy hotels?
But not all players lose money at casinos. Skilled blackjack players can actually influence the outcome of their games by using a system. Sugar rush juego.
The key is to have the odds on your side and bet properly. And the same holds true for successful trend trading.
Playing the Odds
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Winning blackjack players and winning trend following traders both think in terms of odds.
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A little while ago, I met Mike Aponte, a former member of the MIT blackjack team. He was featured in the book “Bringing Down the House” and the movie “21.”
He explained to me how certain rules gave his team a mathematical edge against the casinos. These rules told them when to hit and when to stand based on favorable odds. That’s how they were able to make as much as $400,000 in a single weekend.
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Trend following uses a very similar approach to moneymaking. It tells you when to buy. It tells you when to sell. The trend trading of my world is based on mathematical formulas that increase your odds of winning and reduce your chance of losing too much money that you can’t play.
Look, it’s really simple. If you approach the markets with the mindset of a trend follower who understands the mathematical odds, have a system for detecting when those odds favor you, and can pull the trigger on a trade at the right time, you don’t need to fear the Wall Street casino.
In fact, you can make a killing from it. Somebody needs to tell Mr. Gross that not everyone will be a loser when the bubble pops.
Please send your comments to me at [email protected]. Let me know what you think of today’s issue.
Regards,
Michael Covel
for The Daily Reckoning
for The Daily Reckoning
Ed. Note: The most entertaining and informative 15-minute read of your day. That describes the free daily email edition of The Daily Reckoning. It breaks down the complex worlds of finance, politics and culture to bring you cutting-edge analysis of the day’s most important events. In a way you’re sure to find entertaining… even risqué at times. Click here now to sign up for FREE.