As you will recall, a pair trade is a trade that goes long one particular side and brief the other with the thought of capturing the difference in efficiency. Another way to frame my current favourite pair trade is “Wisdom” vs “Emotion”.
It is my speculation that a species’ evolutionarily effective psychological responses are codified in DNA as instincts. We also know that marketplaces punish herd actions, given that the herd can be spooked, and for that reason trusted to overreact in moments of peak agitation. This is why I like to measure volatility and describe it with statistics in this sort of a way as it is both steady enough for continuity and nevertheless adaptive enough to respond to alter in accord with deeper developments which are evolving beneath the surface of immediate observation
In this pair trade Buffett plays the function of wisdom, the protoypical wise uncle who has observed it all, and knows how to body the problem and navigate via uncertainty. The newest, best ETF, the metaphorically exuberant youth in look for of riches in the land of milk and honey, is represented by EEM (the emerging marketplaces.
There is a time for each in human daily life cycle, in the passing of seasons, in the cycling of markets. Would we truly say that the exuberance of youth ought to be minimize out of our lifestyle and encounter? in which would hoanghaivan.org arrive from? the entrepreneurship? wisdom is not every little thing, but it also has its time and area.
Just as we can grow and mature our judgement, so to can we bring diverse values and insights to bear as the market morphs around us.
This is obviously Buffett time, however you slice it.