All investors create a intellectual construct of how and why the markets do what they do. (They may not be aware of it, but they do). Mine is loosely based on Chaos Theory, which combines elements of random, non-linear dynamic behavior with Trend. That’s why sentiment and market internals are so important to my construct.
I also like the weather map metaphor because it reminds me of two important facts. First, extraordinary investments, like weather systems, are transitory phenomena. Even the best investments don’t generate excepitonal returns forever.
Second, investing, like meteorology and thermodynamics, is not an exact science. It can help you to identify the storm systems that are going to make things happen. And it can tell you what things will look like when the storm has passed and thermal equilibrium has been once again restored. But it tells you very little about what happens in between.
His blog is worth checking out.
WEATHER MAP THEORY OF GLOBAL INVESTING
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