My inbox is deluged with rants and demands from people who are insisting that This. Rally. Must. End. NOW!

A composite of their emails would read something like this: “How can you sit there so blithely while the Fed debases the world’s reserve currency? Why haven’t you commented on POMO?!? The entire game is rigged, and your just another @%$# salesman for Wall Street!”


My day job is working in an asset management firm. From that perch, I look at the world as a series of risks and opportunities. I am not a political analyst, nor a professional Fed critic. If through my research and analysis I come to a conclusion about a given issue — Bailouts, Fin Reform, Foreclosures, Stimulus — I am happy to share them.

But make sure you understand this much: I consider many other factors beyond the macro. This includes sentiment data, liquidity, market breadth, trend, volume, and valuation. And while liquidity can mean many things, this cycle its been pretty much all Fed all the time. That was what hedge fund manager David Tepper was referring to when he noted the Fed was pouring fuel on the fire. When the Fed sends their minions out to discuss the Bernanke Put, they add even more gasoline to the conflagration.

Some people rush for the fire hoses, but my job requires me to grab some marshmallows and sticks and head over to the boy scout jamboree campfire.

If you are constantly fighting the tape, if you missed the run up and are now whining about it, let me steer you to esteemed technician Ned Davis of NDR. In his 1991 book Being Right or Making Money, Davis tells the story of missing trades, investments and rallies because they did not fit some expectations of his regarding the economy or valuations or other factors. The title of his book and of this post comes from a  more senior trader, who simply asked him: “Do You Wanna Be Right, or Do You Wanna Make Money?”

As to the present rally, it will end (eventually). I cannot tell you if it ends with a 25% correction (thats my high probability bet) or a 55% 2008-09 like crash, or a Prectorian 90% end of civilization collapse. Regardless of how the rally concludes, the folks who missed an 85%  generational run up in equities will pound their chests and say “See, we told you so!” And they will have made absolutely no money in the process.

So for all of you Kremlin Fed watchers, politicos, policy experts and amateur economic wonks, I put Ned Davis’ question to you now: Would you rather be right, or make money?


Category: Apprenticed Investor, Investing, Markets, Psychology, Really, really bad calls, Trading

Please use the comments to demonstrate your own ignorance, unfamiliarity with empirical data and lack of respect for scientific knowledge. Be sure to create straw men and argue against things I have neither said nor implied. If you could repeat previously discredited memes or steer the conversation into irrelevant, off topic discussions, it would be appreciated. Lastly, kindly forgo all civility in your discourse . . . you are, after all, anonymous.

107 Responses to “Do You Wanna Be Right, or Do You Wanna Make Money?”

  1. hammerandtong2001 says:

    It makes no difference,
    If you’re short or long.
    What matters only is:
    If you’re right, or
    If you’re wrong.

    Words to live profitably by.


  2. FrancoisT says:

    I’d feel quite right…to make money! :-)

  3. Through the Looking Glass says:

    You have to be dyslexic to read the tape, or
    turn it upside down and read it in the mirror.

  4. Chief Tomahawk says:

    Hmmm… BR, I believe you were looking for a 25% correction since about July and then begrudgingly went 48% long because of too many pessimists (nice call!)

    Just out of curiosity, if the averages do endure a 25% correction from DOW 11k or so, any guess as to how that will unfold in the price of gold?

  5. I have stated via the Secular Bear post (this chart) that the median is:

    a 50%+ Bear market
    a 70% snapback rally
    a 25% correction after

    But that is just the median. Given the Fed firehose, I have no idea how far this goes (Which is why we keep adding to the long side)

  6. w says:

    BR, thanks for so generously bringing us back to earth from time to time :-)

    Much appreciated as always.

  7. jw says:

    It’s a trick question. These things are only obvious when the Dow is flirting with 11,000. Or 14,000.

    And I’ve been reading and hearing experts say the same thing since the Dow hit 10,000 the first time.

    Careful you don’t become a contrary indicator, since we’re now living in the bizarre world where it pays to fade the faders who thought they were fading the fade.

  8. cpd says:

    It isn’t just equities where money can be made. I have had zero equity exposure this year and my YTD return is higher then the S&P by a sizeable margin.

  9. illoguy says:

    This is so easy. I’d rather make money. Any answer that does not directly answer the question means a person would rather be right.

    Which is an acceptable answer unless your job is to MAKE MONEY.

  10. dr dre says:

    100% correct. I battle this every day. Especially in this emotionally charged environment we live in where politics and government intervention are the ruling bull market. (see my post on this )

    Where it gets very difficult is also when fundamentals dont match the market. What a market SHOULD be doing (from a supply and demand perspective for example) and what it actually DOES are sometimes at odds. This is very difficult to grapple with. ( Maybe I am a better analyst than trader!! ) Traders just can shut down what it should be, see the tape and as barry says get out the marshmallows and enjoy pure stupid sugar bliss.

  11. BTW, just because you are making money in other sectors, does not mean you CANNOT make money in equities.

    Making money in Gold or Bonds (ala my pal David Rosenberg) does not excuse missing a HUGE Equity rally.

  12. [...] Barry Ritholtz, “Would you rather be right, or make money?”  (Big Picture) [...]

  13. Arequipa01 says:

    Madre, yo al oro me humillo, (Mother, to gold I humble myself)
    Él es mi amante y mi amado, (He is my lover and beloved)
    Pues de puro enamorado (Being fully enamoured-[a conceit])
    Anda continuo amarillo. (He moves around always yellow)
    Que pues doblón o sencillo (Whether a doubloon or a shilling)
    Hace todo cuanto quiero, (He does everything I want)
    Poderoso caballero (A mighty gentleman)
    Es don Dinero. (Is Mister Money)


    Speaking of being right and making money, who was talking about Argie bonds, corp bonds and de peso- pues fue Johnny Pacheco

  14. andrew755 says:

    Amazing Post Barry… dead on. I’ve lost a lot of money in the past betting on what I thought should happen and not trading/investing off what is happening in front of me on my screen.

  15. Moss says:

    There is no way the market will tank before the elections, absolutely no way no how. It is all about the Fed.

  16. Robespierre says:

    And Barry I totally agree with you. However, why didn’t you follow your own advice when it came to gold? Could it be that you decided to be “right” in this particular case? I’m not picking on you but just pointing out that no one is immune…

  17. wally says:

    Recent rallies seem to have been classic ‘climbing a wall of worry’, which is another way of saying that the key was too many pessimists.
    Not coincidentally, the Fed starts pouring the gasoline when the worry gets to be a problem, so there is an alignment. All Fed and too many pessimists happen together.

  18. My pal Keith McCullough takes the opposite side of this trade:

    You want a bearish view?
    Globe and Mail Update

    Hedgeye Risk Management [] hosted a conference call with investors on Tuesday afternoon, outlining why they see big problems ahead for the global economy. Among their calls: The S&P 500 could easily slide 7 per cent in a single day; U.S. economic growth won’t rise above 1.3 per cent over the next few quarters; and U.S. home prices, as represented by the S&P/Case-Shiller index, could slump another 20 per cent.

    Oh, and Japan’s economy is about to blow up.

    That’s right, these folks are bearish. And much of their bearishness is derived from a belief that regulatory interference in the economy is a no-no – whether it comes in the form of ultra-low interest rates, asset purchases by central banks or government stimulus spending.

    As you can probably guess, they’re not Keynesians and nor are they fans of Paul Krugman [], the New York Times columnist and influential professor at Princeton University. And as for the stock market’s rally over the past five weeks – coinciding with investor enthusiasm over the possibility that the U.S. Federal Reserve will attempt to stoke economic growth with another round of quantitative easing – they’re not believers.

    “It’s this academic dogma that we can fix everything by cutting interest rates to zero and infusing stimulus,” said Keith McCullough, Hedgeye’s chief executive.

    He’s a keen observer of Japan, where massive debt loads and an over-reliance upon exports is setting up the world’s third-largest economy for disaster, and signalling where much of the rest of world is going. Despite the fact that the Nikkei 225 has slumped about 16 per cent since April and isn’t far above a recent 28-year low, he believes there’s worse to come.

  19. karen says:

    Hindsight is 20/20.. this post wreaks of hubris.. and i find it hilarious..


    BR: This is not me pounding my chest — as I have made it very clear in prior posts, we are still 50% cash. This is an observation of the armchair policy wonks who have missed the rally.

  20. obsvr-1 says:

    The big problem we face is when the question is

    “Do You Wanna DO Right, or Do You Wanna Make Money?”

    The TBP blog is filled with post on where we believe the banksters, politicos and oligarchs position is on this !

  21. Matt SF says:

    Congrats BR. You just gave an excellent example of why MMs become closet indexers… they let their cognitive bias(es) skew their actions from what they feel should be happening versus what is actually happening. And, in the end, underperform that pesky benchmark called the S&P 500.

  22. Jack Damn says:

    I’ve always lived by this quote: “Trade what you see, not what you think … ”


  23. JB says:

    Karen sounds like she is not a participant . . . .

  24. ACS says:

    “In his 1991 book Being Right or Making Money, Davis tells the story of missing trades, investments and rallies because they did not fit some expectations of hos regarding the economy or valuations or other factors.”
    Barry that “hos” was definately a Freudian slip!


    BR: Doh! I’ll fix

  25. Robespierre says:

    @Barry Ritholtz Says:
    October 6th, 2010 at 11:07 am

    “Making money in Gold or Bonds (ala my pal David Rosenberg) does not excuse missing a HUGE Equity rally.”

    Well HUGE until you price it in gold…

  26. I agree with illoguy; I too want to make money. And since trading is a zero-sum game, I’m happy there are people who don’t!

  27. mad97123 says:

    Barry, last spring when you were thumping Rosenberg and others for missing the ‘obvious rally’ we got a nice correction days afterward. Let’s hope we get your 25% correction this time around.

    The purpose of a secular bear market is to ring-out all the speculative nonsense where capital is being miss-allocated based speculation about what other speculators are speculating on. Go ahead and buy stocks, even if the fundamentals are poor, because it’s just a trade. You (we) are the smart ones (not the other guy), so you will always find a ‘greater fool’ to sell to at even higher prices.

  28. rootless says:

    And how does this bragging how much money you have made, allegedly, compared to the ones who have “missed the rally” and were “whining” now, differs from the bragging by others how smart they had allegedly been, because they had made money a lot at the peak of the stock market bubble in 2007? And then they lost everything during the following crash?

    Performance, e.g. of the market timing strategy you follow here, Barry, isn’t validly measured by how much money one has made from the trough to the peak during a bear market rally. Performance can only be validly measured over the full market cycle. So the real question is how much money of the one made during the run up from trough to peak will be left after the next substantial downturn back to or below the previous trough.


    BR: We have not so much made money this year as avoided losing money. But again, you seem to be missing the main point . . .

  29. MelJ says:

    On September 1st, 2010 at 1:26 pm BR wrote:

    > We were 80% cash, we are now 56% cash, so we are still
    > MOSTLY cash — hardly a ringing endorsement or a new era.

    So were you right then? How about producing some verifiable data to prove that you can time this market and beat the averages? For example, you can start with an imaginary $10,000 and whenever you think the market will go up, buy an S&P500 index and whenever you think the market will go down you sell it and put the money in cash (or better still short the S&P500) and if you publish your trades we can track how well you actually do. I long for the days of Louis Rukeyser when his market pundits made hard predictions with numbers that could be verified.


    BR: Mostly cash missed the downturn, 100% cash missed the flash crash. There are many ways to outperform, and avoiding the downturns is one of them

  30. drocto says:

    Great post – many of us, myself included, would benefit from repeating the title of this post as a mantra every day.

    However, go easy on the “85% generational run up in equities”. The March 6, 2009 intra-day low on the S&P500 was 667. The index closed below 700 on only four days. It closed below 750 on only nine days (including the four below 700). Anyone who bought aggressively during the decline would be lucky to have a cost basis below 800. Even if one bought only during Feb. & March 2009 the cost basis would be about 750. The gain from 750 to date is 55%.

    55% is a huge gain in under two years, but far below the phantom 85%. Furthermore, I get a gain of 74% on the S&P500 from 667 to the current 1160. Add in a few percent for dividends and maybe it gets to 78%.

    Of course, the bold investor could have made well over 85% with good stock picking.

  31. drocto

    Here are the SPX, NDX and Dow numbers, from the March 09 lows to the April ’10 highs:

    SPX 82.94%
    NDX 97.92%
    Dow 74.00%

    Don’t you think 85% is a fair ballpark of these indices?

    If you take the average of 83%, 98% and 74%, you get (drum roll please) 85%

  32. beaufou says:

    I think that’s the big difference between you and Zero Hedge.
    They are way too obsessed with being right.
    It isn’t my line of work, but I thought it was a money game.

  33. Liquidity Trader says:

    Rootless and drocto

    You guys are totally missing the point of this post. I read this as a warning to traders (which is what I do for a living) not to get too involved in the bullshit that interferes with a clear trading mind. Your sour grapes makes you read it as bragging.

    Ignore the advice, keep fighting the rally. Better yet, please short some SPYs to me.

  34. Ny Stock Guy says:

    Barry: Just keep doing what you’re doing. Don’t ever change. The best part of this blog are the updates every few weeks telling us your Fusion asset mix.

  35. Bess says:

    “technically equities didnt make you money priced in gold.”

    As if I’m gonna have to pay for my kid’s nursery school in fuckin gold.

  36. rootless says:

    @Liquidity Trader:

    How predictable it was that someone would make an ad hominem comment like you did about “sour grapes” in reply to my comment. Drawing conclusions about what I have been doing from my skeptical comments is just fallacious. I was fully invested and highly levered up around the market lows in winter 2008/spring 2009. When I wrote about this here back then, it was considered as crazy. With the money I realized during the rally after March 2009 I have been able to pay off more than $80,000 of credit card debt and make some more. My trading portfolio today is 6 times the value compared to early 2007 (although recent months have been quite a drag). Now what?

  37. dead hobo says:

    karen Says:
    October 6th, 2010 at 11:35 am

    Hindsight is 20/20.. this post wreaks of hubris.. and i find it hilarious..

    You forgot it’s a lot easier to play with OPM that it is with your own. What’s the worst thing that can happen? With you own cash, risk matters. With OPM its “I’m sorry sir, the market tumbled and nobody could have seen it. Fortunately, the Fed fire hose will probably allow us to replenish the flash little glitch we just saw. Would you like to add more to this buying opportunity?”

  38. dougc says:

    Buy the rumor and sell the news, large investors have known for a month about QEII, sep 29 “the ties that bind the fed”. They need someone to sell to in november, let the buyer beware….The economy is slowing, maybe a recession.

  39. drocto says:

    Liquidity Trader – Maybe you should read the first line of my post again. I did not miss the meaning. It’s pretty simple.

    I only argue with puffed up statistics. There’s no need to stretch the truth on the rally.

    The implication of being right vs. making money is not to ignore facts.

  40. IS_LM says:

    As you can probably guess, they’re not Keynesians and nor are they fans of Paul Krugman [], the New York Times columnist and influential professor at Princeton University. And as for the stock market’s rally over the past five weeks – coinciding with investor enthusiasm over the possibility that the U.S. Federal Reserve will attempt to stoke economic growth with another round of quantitative easing – they’re not believers.

    “It’s this academic dogma that we can fix everything by cutting interest rates to zero and infusing stimulus,” said Keith McCullough, Hedgeye’s chief executive.

    Oh, lord, more Krugman Derangement Syndrom. They should just say that they are also not fans of most of modern macroeconomics as it has been practiced since Robert Lucas introduced rational expectations into a general equilibrium framework. (For example, in this little ditty, Krugman takes workhorse modern macroeconomic model and demonstrates the social benefits of fiscal stimulus when nominal policy rates have hit the zero lower bound.) What do these Lords of Finance propose be done exactly? I would bet my 400 quatloos on Krugman’s observations regarding Japan over Lord McCullough’s anyday.

  41. rootless says:

    Correction: 6 times I wish. 4 times is the correct number.

    Whether Barry intended to brag or not, his main argument is, as I understand it, that he has been right compared to all the suckers who missed the rally, because he has been following the speculative momentum and made money from March 2009 to today. And my criticism of this argument is that performance of a trading or investment strategy can’t be validly measured just by using the time from the trough to the peak of a stock market run up as comparison. It has to be measured over the full market cycle. There very well can be valid investment approaches by people who missed this specific rally, if they make money with their strategy over the full market cycle.


    BR: We made money from March 09 til April 2010. Since then, we have mostly avoided losing money. Its been a good strategy.

  42. Low Budget Dave says:

    The real question still concerns timing. To steal from last weeks metaphor; we are all enjoying the dance, and everyone wants to leave right before midnight, but there are no clocks on the wall. Sooner or later these bulls turn back into mice, and the rally back into a pumpkin.

    Like most people, my internal alarm clock goes off one day after I lost 8%. In the first few minutes after metaphorical midnight, I lost all the money I made in the last year.

    Because of the magic of the Fed, my gold and bonds holdings are now the riskiest part of the portfolio.

  43. dead hobo says:


    I don’t know how to trade fast money style and I don’t plan to learn. I know that some people here think they are ass shaking smart and love to bet. These are probably the ones BR thanks for his gains. I suspect a lot of the braggarts here also have dinky hobby accounts that provide pizza money on good days and ignore the losses while bragging about their gains.

    I don’t place day trading bets. I depend on solid rational economics. This is why I’m so upset with the Fed bidding up the price of assets with electron money. I’m using my cash, not OPM. I don’t play with a dinky hobby account. I am angry about the constant market manipulation that has chased out a large number of the market participants from not too long ago. Real markets need a gaggle of people with myriad objectives. We just have the Fed and a few computers. Too risky for me, although if Dudley gifts the market $500B new money on top of the current cash recycle plan and provides start and end dates, then woo woo woo!

    I made a lot in prior markets and sat this one out for personal reasons. I would happily jump back in if I saw a dependable pattern that looked like it might hold up for explainable reasons for a few months and a good entry point. Chides from people who bet with OPM or from hobbyists with dinky accounts just give me something to write about.

  44. [...] over at The Big Picture, seems be getting a lot of the Zero Hedge traffic these days. Because, he says, he’s been getting hit over the head with emails from readers bashing him for not bashing the [...]

  45. mememe says:

    I think Liz Phair said it best:
    It’s nice to be liked
    But it’s better by far to get paid
    I know that most of the friends that I have
    Don’t really see it that way
    But if you can give ‘em each one wish
    How much do you wanna bet?
    They’d which success for themselves and their friends
    And that would include lots of money

  46. ES says:

    Isn’t it the same as saying”greed is good”? You see something that is wrong but it allows you to make money. Your job is to make money not correct society problems and thus this is what you do? In the end, you are doing fine, as for society – who cares, it is their problem? Can’t you make money and do the right thing at the same time?


    BR: No, I am saying that some people’s jobs, as asset managers, are to identify risk and reward. other people’s jobs are to do policy analysis.

    The people I am giving grief to are using the latter to excuse failing to do a good job doing the former . . .

  47. cjmorris says:

    This post is hubris. Reminds me of the recent Planet Money episode where the Wall Street guys think they’re smarter than everyone else. So much for the downturn changing attitudes.

    Your trading the market makes sense since that’s your job, but the average investor should not even be trading this market. That’s why these type of blogs are dangerous for the majority of investors. Encourages everyone to act like a player though the market is tilted against them.

  48. Thor says:

    PS – “Hah!” referred to your pizza money comment.

  49. gps says:

    I’d like to be a “Lucky Fool” than “Unlucky Genius” . Its as simple as that Instead of talking(being right), its better to put money in line and make money.


    BR: In the market, its always better to be lucky than smart (in theory, being both helps but that has never been quantified)

  50. louis says:

    A lot of people bought houses because they followed the same kind of advice.

    “There is no way the market will tank before the elections, absolutely no way no how. It is all about the Fed.” Unless someone accidentally fire’s their machine gun. But if that happened I’m sure it would not be by design.


    BR: Why would advice that “Fed liquidity drives equity prices higher” induce someone to buy a house? You must make the distinction between good advice to traders (Don’t fight the Tape) and bad advice to home buyers (Prices always go up). They are totally unrelated.

  51. I am somewhat surprised by the reaction here.

    In terms of our asset management, we missed most of the downside, and caught some of the upside. Given our huge cash positions this whole year –especially May and June it should be pretty clear that we have not been rampaging bulls and have not caught all of the upside.

    I know haters gots to hate, but this is more of me reminding myself not to fight the tape — and not a hubristic chest pounding We-Rule-You-Suck post you see elsewhere in the conspirosphere.


    For those of you who may be interested in the more Apprenticed Investor level discussions, see these posts

  52. Ny Stock Guy says:

    Don’t fight the tape.

    Or the Fed!


  53. dead hobo says:

    Barry Ritholtz Says:
    October 6th, 2010 at 2:35 pm

    I am somewhat surprised by the reaction here.

    When you explain yourself and place yourself in context with your readers, and show respect while acknowledging your different objectives, you look good. It’s all a matter of tone. When you make yourself appear all ‘fast money’ and smarter than the average bear while chiding people with who sometimes don’t want to come out and play, then you beg for snarky replies, and I suspect, are really just stirring the pot and are really asking for them.

  54. ab initio says:

    As an investor, BRs question is straightforward since we are wearing the investor hat and have to play the hand that we have been dealt. Being in equities or not is typically not the situation for many investors but its our asset allocation based on our risk profile and investment objectives. I rarely trade indexes and focus on individual securities.

    From a macro standpoint the issues are not that clear – they never are :) On one side – we have ECRI, Consumer Metric and CFO Surveys pointing to economic deceleration. And there is also the fact that inventories are piling up. On the other side – we have the Bernanke Put and the clear intent of the Fed to inflate asset prices and the intent of all central banks to debauch their currencies.

    The questions in my mind are – is QEII already priced into the markets and have the markets priced the unintended consequences of currency debasement? Its interesting to note that the BoJ is coming into this fight with a pea-shooter ($60 billion) while the Fed is wielding the bazooka (trillions). Also, high flyer CRM cracked today over 10%. Is that company specific or is it the canary in the coal mine? Will the market sell-off on the news of QEII? What other accidents could occur since we have unprecedented and massive financial instabilities globally?

  55. Gatsby says:

    Barry nailed it. In response to all you gold bugs…We don’t pay for cars and mortgages and red bull and vodka and hookers in gold.

    Barry don’t stop what you are doing, you are bang on.

    One ask would be that the Ned Davis book appears to be out of print. Do you (or anyone else) know of any other great discipline methodologies worthy of study?

    While I agree that Rosie did miss the rally, risk is very much an “each to his own” thing. I believe he did say, you could drive home every day at 100mph, but that doesn’t mean you should.

    Personally I like fast cars.

  56. Paul Vigna says:

    Barry Ritholtz, over at The Big Picture, seems be getting a lot of the Zero Hedge traffic these days. Because, he says, he’s been getting hit over the head with emails from readers bashing him for not bashing the market:

    A composite of their emails would read something like this: “How can you sit there so blithely while the Fed debases the world’s reserve currency? Why haven’t you commented on POMO?!? The entire game is rigged, and your just another @%$# salesman for Wall Street!”

    Ritholtz argues, quite rationally, that his primary job is money management, and right now, there are obvious reasons to be in the stock market. (The biggest one is spelled F-E-D.) While he expects a correction of some sort, he chastises the doubters. “The folks who missed an 85% generational run up in equities will pound their chests and say “See, we told you so!” And they will have made absolutely no money in the process.”

    Do you want to be right, he asks, or do you want to make money?

    Of course, some of those doubters undoubtedly got out before the crash, and lost absolutely no money in the process. In fact, depending upon what they actually did with their money after pulling it out of stocks, they may have even made money, while the vast majority were getting taken to the cleaners. Comedy, as Steve Martin said, is all about ti-ming.

    Somewhere, there is someone, at least one person, who perfectly timed both the 2007 high and the 2009 low, and that person made out like a bandit. But most folks got slaughtered like pigs, believing the spin all through 2008 while ignoring the signs that were literally all around them. They ignored it until things got so bad, they’d lost so much, that the rationale flipped to, well, I’ve lost so much, I might as well stay invested. And stay they have. Those people are still trying to get back what they had three years ago.

    Ever since, oh, like November of 2009, the raging stock bulls (and Ritholtz is decidedly not one of them) have been crowing about this big run-up in stocks, and berating people who “missed it.” John Hussman gets a lot of this grief; so does David Rosenberg, for that matter. All the big bears who have remained bearish throughout the rally.

  57. VennData says:

    The self-appointed DIY “investors” above who are “angry” and “upset” at the Fed and post such peevish replies to BR’s spot on critique of them are proving his point. You missed the opportunity of a lifetime and no matter how hard you comment, it ain’t coming back around.

    The central bank is part of the framework. It was put there, and everywhere, to do exactly what it’s doing. It has worked in the past. It has worked recently, along with Obama, Pelosi and Reid (Bush and Paulson before them, and Geithner all over) to save American capitalism. Oh, and it’ll work in the future.

    Central banks are an escape valve. Ours, with its unique “full employment” mandate, gives it even more flexibility to respond. To think statically is to deny reality. That’s what you all did (while you had FOX News on in the background with their “Obama is a Socialist” nonsense.) Rupert Murdock, the tabloid operator, is the one who infected your thinking not Barry Ritholtz. Until you get that, you’re not fit to manage your own assets.

    If you can’t work Greenspan’s simplistic world view, Bernanke’s complex one, stimulus packages, TARP, or governments saving money markets into your investment plan, you’re denying reality. You do not understand how appointed and elected politicians react. You can’t deal with the complexity of our financial world. Hire a professional money manager and spend your time ranting and raving how awful Obama is and how he ruined America. There are plenty of playgrounds for that.

  58. KidDynamite says:

    Barry –

    don’t you think that EQIX today illustrates everything that’s so hard about this market? Basically, “stocks take the stairs up, and the elevator down.”

    EQIX is down more than 35% on, well, a relatively minor earnings miss and guidance (and I do mean minor)… ie, these things are clearly priced FOR PERFECTION, but when they miss, there’s no time to reverse your position!

    So what I”m saying is, I HATE fighting the tape, but I feel like if you don’t fight the tape (and get in “early” – short stocks that continue to rise for a bit), you don’t get a chance on the downside – get what I’m saying?

  59. KD

    I am not suggesting people go out and buy the highest beta, most extended names.

    Rather, the asset managers who are screaming Fed! Zimbabwe! Hyperinflation! have all missed a big rally for reasons of cognitive errors and bias.

    Its after the fact rationalization.

  60. mbelardes says:

    Good post. I started reading TBP in 2008 and you have done a great job “keeping it real.”

    I can tell, easily, the commenters that have missed out on the rally because they were convinced the whole world would collapse ANY SECOND NOW!!!!!!!!!!!!!!

    Yeah. Whatever. The rally since March ’09 on the INDEX is nice, but anyone with some huevos that dropped some coin should have doubled their money, at least.

    So call the crash and be “right” for a second, but I’ve paid off half my law school costs making money on the chance I could be wrong and wasn’t. POW!

  61. daniel k says:

    What about those bears who just kept buying the long bond, which most bears, if they had money to invest or were earning money through the crisis, have probably done?

    The trouble with this rally is that you don’t know when it is over. That’s very challenging.

    Barry, do you like equities now and can you tell us what equities you like, if you haven’t recently?

  62. We are 50% long, own names like C and VZ and other telecoms and small cap tech

    I am still short TOL, which has been a small loser (3%)

  63. ToNYC says:

    Creating a scenario and then talking about it quite naturally and granularly finds cognitive dissonance early and often; quite naturally ignoring the Present as if it doesn’t fit the back-testing from the embedded rationale for the future so invented. A recipe for not making money and quite simply fatal hubris. As the day-trading Asian warrior nut-job in the 1999 room I worked was wont to say with vigor, “STFU and trade!”

  64. call me ahab says:

    and a follow up to my last post (which hasn’t posted)-

    when is the all clear signal? If the markets are where they are based on the Fed and expectations of what the Fed will do- what happens if the Fed doesn’t or is unable to oblige? what happens then?


    BR: Then you sell.
    (I’ll check the filter for your missing comment)

  65. mad97123 says:

    Let’s see, in September 2008, the day TARP was announced the market had an intra-day rally of nearly 1000 points. Was this is good advice in September 2008?

    The market rallies off the November 2008 lows with speculators getting all excited over zero interest rates and QE1. Why? Because “Liquidity always drives equity prices higher, don’t fight the tape. “ The herd rushes, in the market tops, and then drops 35% to the dreaded March 666 low. How did all that liquidity and following the tape work out for you?

    This time it’s going to be different, the Fed really will save the market printing money out of thin air. It’s always a good time to buy more stocks, the mighty Fed’s got your back. Bend over please.

  66. call me ahab says:

    BR is a bullshit artist-

    he believes in the economic plan otherwise known “Keynesian Roulette”- so he is more than happy to play along- his motto “make money and be right” because he thinks its right- and he thinks you should think its right too- ‘most of the folks on this blog nodding in agreement w/ him the whole while-



    BR: Eloquent, insightful, lucid — why on earth would the filter catch this? Its the perfect comment !

  67. markpmc says:

    the title reminds me of the question greg maddux asked a rookie pitcher.
    “You trying to throw strikes or get people out?”

  68. Liquidity Trader says:


    The comment was from a traders perspective — it went right over your head.

    Not only do you impose your politics on a non-political post, you completely misunderstand it. And to magnify your foolishness, you are rude to our host in a way that reveals you to be a much bigger asshole than I previously imagined.

    This site is not for people like you — its for serious asset types. Try one of the Austrians sites,or ZH — they don’t care about making money.

  69. mbelardes says:

    After reading through the comments (I rarely see BR this active on the comments, by the way) I’ve come to the conlcusion that some of the commenters are here to learn about macro perspectives and data analysis as a part of money management and some are here to root against the money management sector altogether.

    This is why some of the posts where BR criticizes the market and market participants, such as firms and regulators, are so wildly popular and some of the sweet charts and data analysis get MAYBE a few dozen comments.

  70. JasRas says:

    I’m in the makin’ money business, and frankly this isn’t that hard!! Right or wrong, the Fed and other CB’s are doing some version of QE, monetary expansion, etc… My basic view is dollars are worth less and other things are worth more…other things mean stocks, commodities–including precious metals, etc. Things that promise to return your dollars at a latter date in exchange for a predictable cash flow (ie. fixed income) mean you are getting dollars back later at an unknown deflated value. The cash flow paid in no way is compensating you for that lost buying power. Now, you say, there is no inflation! Look at the CPI. Well….if you believe stats compiled by the government, good luck to you because assets that perform well in inflationary environments are doing well. What amount is inflation and what amount is debasement is not for me to figure out or care….

    Are we short term over bought? In all probability, yes. Is this market obliging people and “letting them in”? NO! My experience with rallies that “won’t let you in” is that they’ve got a ways to go. With so many institutional types underperforming, you are witnessing a rally most likely driven by career risk. But, again, the why is somewhat irrelevant. Are you going to watch, or are you going to participate? Are you long? Are you long enough?

    The interesting thing I see is the TNX is still hitting record low yields on the 10yr… Someone is going to be wrong, and in a big way because these rubberbands only stretch sooooo far. Is it stocks or is it fixed? One could argue that both are overbought right now. Gold too for that matter. Something somewhere is going to take a breather. Which do you want to be wrong on. You want to top-tick fixed income? Gold? Or a stock market that still isn’t up to the April highs? I can tell you which one is easiest to get forgiveness for…equities.

    Good luck to all.

  71. davver says:


    The essential problem is how one is supposed to own assets they know are overpriced. If you believe equities are overpriced then you are playing a greater fools game. How are you to know when you aren’t the greatest fool?

    “BTW, just because you are making money in other sectors, does not mean you CANNOT make money in equities.

    Making money in Gold or Bonds (ala my pal David Rosenberg) does not excuse missing a HUGE Equity rally.”

    Can’t you say the same thing about every bubble? Shouldn’t I have been flipping houses from 2003-2005. Shouldn’t you have been buying and then selling tech 1998-2000. The truth is you have no clue when a bubble is going to end. You could just as easily have seen the housing bubble or tech bubble end earlier or later then it did. There is no rationality to a bubble. Prices simply get more and more insane until they don’t anymore. They seem just as insane the whole way through. You can’t say you have some magic insight as to pinpoint when the insanity will stop.

    Look, I use technical investing and other indicators to try and pick my buy and sell points. But I buy things I think have good fundamentals and I sell them when I think they don’t anymore. The technical stuff just helps me pick specific entry/exit points on things I already feel good about. I don’t run out and buy assets I think are crap because some chart or sentiment indicator or gut feel makes me.

    When I was younger I put myself through college playing poker, which I feel is very similar to investing. I was a pretty conservative player. I read up on Sklansky, analyzed my hands logically, and played very mathematically. I was aggressive but didn’t naked bluff often just enough to keep people off balance and steal some pots. I was careful never to get too deep into a hand that was trouble. It was reliable profit.

    Some people are successful a very different way. They are extremely hyper aggressive and bluff constantly. They rely almost entirely on reading their opponent with little regard for their own cards. I’m sure that there are many people with a similar talent for trading financial instruments. They have a read on the tape. They can make money that way. However, like poker there are many people who think they can do that and can’t for every one that can. In fact I’d say its less likely in investing, as the sample size on investments is too small and the complexity too great.

    If you truly think you have the talent to pick the bottom and top of every single investment trend then congratulations. Me, I’ve got to be more humble. I’ve got to focus on things I understand and have a track record of success with. I’d rather stay away from things I consider dangerous that I don’t understand. So I don’t think its wrong to chase every single bubble. Like Rosenburg I’ve made decent profits in gold and bonds. And I didn’t lose any on the way down for equities, in fact I captured about half of the down leg as a short before covering. Maybe I didn’t quintuple my money, but I’ve done rather well, and with a very low amount of risk in my mind.

  72. DiggidyDan says:

    I’m just glad after liquidating a lot of my positions from the stock market due to not believing the economic recovery was sustainable, I kept my basic core holdings in stocks i still believed in that pay good dividends and have constant demand such as ADM, BDX, BHP, CVX, GSK, JNJ, MMM, SCCO(formerly PCU YEAH COPPER!) and UL. and halved the rest of the stuff between long term TIPS Bond funds (LTPZ and PRRRX) and an emergency fund in 3% yield MM account. Only problem is I had a couple unforseen blowups in BP and BAX due to non market catastrophes that stopped me out and cost me some big coin. I haven’t made much money over the last 3 years, but I haven’t lost any and I have beat the S&P 500.

    Only problem is, I lost 60 Large in the housing market and can’t refi at these low rates and took a pay cut.

  73. call me ahab says:

    “This site is not for people like you — its for serious asset types”

    laughable (and so full of self importance)- also you may want to consider a career in blog enforcement(as if BR can’t take care of himself)-

    also- where are my politics? Where were they mentioned in this thread?

    I guess you must have mind melded me from across your keyboard (and my guess is you still got it wrong)

  74. “Regardless of how the rally concludes, the folks who missed an 85% generational run up in equities will pound their chests and say “See, we told you so!” And they will have made absolutely no money in the process.”–BR, above


    ‘Equities’ are the ‘only investment’?

    why not run some DOW/Gold, or DOW/Silver, Charts to go with that?

    as Boockvar, rightly, was pointing out, recently, the SPX/CRBRIND, after the “strongest one-month Equity Rally since ’39″, is nearly 1 ..

    Hey, you’re better than that…

  75. call me ahab says:

    I ask:

    “what happens if the Fed doesn’t or is unable to oblige?”

    BR replies:

    “Then you sell.”

    I was looking for something more thorough (in a macro sense)- but I like this answer just on brevity alone

  76. gman says:

    I may use that rant in the near future…maybe at my firm…to the only person who is a “tea-party fellow traveler”…who also just happens to be the only trader of the 9 we have who is struggling!

    Well put!

  77. Andy T says:

    Boo-Yah Barry!

  78. GYSC says:

    I appreciate you taking the time to post this and answer all the comments. I think I see better know how you look at things.

  79. Andy T says:

    It’s actually a good post BR. It does come across a little bit like “chest-thumping,” but sometimes the black and white pixels come across in a different way than the voice/tone in the head. We’ve all come across the wrong way in the written word.

    With that said, I think the S&P will trade below 900 before 12/31/2011. I’d take some friendly side-action on that proposition bet.

  80. rootless says:


    We made money from March 09 til April 2010. Since then, we have mostly avoided losing money. Its been a good strategy.

    Well, good. I haven’t been doing so well for recent months. But it wasn’t my fault. My trading program did it.

    However, as of today, S&P500 is down only 4.7% from the peak in April. So my criticism stands. You say your approach is right, because you have made money since March 09, based on the performance mostly during the price run up. You say yourself the secular bear market has still to find its bottom. Right? And you think the market is overvalued based on metrics like CAPE? Then, I have to agree with some other commenter here, that you are playing the greater fool game. And, in addition to that, you ridicule the ones who are grumpy about it and don’t want to play along and have therefore “missed a 85% generational run up”. You basically say that everyone who participates in this game could have made huge profits. But this logic is flawed. A greater fool game can’t work and won’t have worked for everyone who has participated, after everything is said and done. It only works for some, the ones who are the first ones at the exits, you may belong to those, but it doesn’t work for many. It works for some because it doesn’t work for many. The gains for the ones are the losses for the other ones. The outcome this time won’t be different to the final outcome of the stock market and real estate bubble earlier this decade with misery for many. And the judgment over any investment approach will be spoken when the market cycle has come to its full closure, not based on the performance from the market lows in March 2009 to today.

    Your at least implicit advice that one should do it like you have done it, if one wants to make big gains in the stock market, is actually very bad advice, even if it has worked for you.


    BR: You still aren’t seeing it: I am discussing the process, not the outcome. This is about recognizing when you are wrong — eg, we had too much cash — and reversing yourself.

  81. PopDocTrader says:

    Barry and others,

    As a psychologist who has spent many years consulting around psychology of risk with financial professionals on an institutional level, I have another way to put it… alternative to the classic question of do you want to be right or make money. Another way to look at it is: As a trader one must focus on doing what is right and not on being right. I know it sounds like splitting hairs, but when you operationalize the statement it forces one to focus on their own internal process and will usually make you more aware of the ubiquitous mental biases that are part of human nature.

    On the front page of my web site:

    Trading in today’s market can be very stressful, even traders with many years of experience can make irrational decisions. Traders justify decisions with data and logic, but in the heat of the moment, it’s emotion that causes us to enter or exit a trade. All traders face the same mental traps and biases, its how we deal with them that makes the difference. Our beliefs, expectations, and emotions act as a filter on our perception of the market, our filter projects a structure onto price action that forms the basis for trade entries and exits. We don’t see the market itself, we see our projection. It is simply human nature to see things through our own personal filter.

  82. rootless says:

    As for the expectation some seem to have here that another quantitative easing by the Fed will come with another huge run up in the stock market from here, I would be cautious about this. The stock market rally that started in March 09 was supported by an economic environment with improving data and company earnings. The direction of the economic data has taken its reverse course in recent months. The data have been deteriorating and will probably continue to deteriorate over the next months, I think, likely right into the next recession. Of course, one never knows how big the disconnect between stock market and economic reality could become. It often can be bigger than one expects. And the larger the disconnect the higher the probability of an outright, furious crash at the end.

  83. spiderjhn says:

    BR, I enjoyed this post and The Central Bankers are Paid to Lie. I started out in the early 70s and will retire and the end of this year. Would you care to give your thoughts of inflation down the road?
    Just playing whatever hand is dealt my way.

  84. Warning: Heavy Ignorance ahead..

    Bess Says: October 6th, 2010 at 1:09 pm

    “technically equities didnt make you money priced in gold.”

    As if I’m gonna have to pay for my kid’s nursery school in fuckin gold.
    Classic. Like there’s isn’t a ready Cash Market, replete with Buyers, for Gold..


    I’m sure you’re paying those tuition bills with BAC cert.s, right?


  85. Efficientish says:

    Barry – I love this post.

    I’ve also had a very good year in 2010 simply by avoiding the big drops and being cautiously optimistic on the recoveries:

  86. rootless says:


    You still aren’t seeing it: I am discussing the process, not the outcome. This is about recognizing when you are wrong.

    I don’t see what I’m not seeing, allegedly. Are you saying the ones who have “missed a 85% generational run up” and staid grumpy during the whole rally instead have been wrong, if the goal is to make money? Or aren’t you saying this? I take from your posting that you are saying this. Am I mistaken?

    And what is this supposed to mean that you are discussing the process, not the outcome, when it is about “recognizing when you are wrong”? How do you get to the conclusion to have been wrong, if not based on the outcome? Obviously, your criteria is to have made money at the end. This is an outcome, isn’t it?


    BR: If you stay married to ,money losing positions for reasons of ego or belief, that is a flaw in your process.

  87. gloppie says:

    “I’d far rather be happy than right any day”
    — Douglas Adams

  88. jad714 says:

    Now, I always like to comment on the more simplistic points in these posts. “Would you rather be right, or make money?” It’s funny, because a lot of people value their own pride more than the money they are arguing about.

  89. tude says:

    Well for us regular folks, who have very little compared to you high rollers that wipe your butts with 100 bills and have no problem gambling with thousands, the answer is “I would rather NOT be wrong”

    I have to laugh at posts like this (or maybe cry?). In my regular life living outside the 5th percentile, I cannot afford to be “right” or risk my measly savings “making money” in this casino. I just cannot be wrong :( I wonder what exactly the answer is for people like me…

  90. tel1 says:

    You are all idiots!!!!

    It’s not about being right or wanting to make money. It’s about being rich or poor, because if you are rich you can count on the Fed to socialize your losses. Hence, you can be right and make money, ALL THE TIME. And this goes a long way to explain your later post on this country’s wealth distribution.

  91. tel no1 says:

    Um, no — that’s wrong

  92. tel1 says:

    Sorry but the wealth distribution graph does not lie. If you are in the wealthiest quintile and feel you lost money during the market rout of 2008 then consider yourself lucky that you didn’t lose everything, -if not for the Fed. At least that is what the main-stream media is saying: the Fed saved Capitalism.

  93. greg says:

    Here’s an example perhaps of thinking you’re right versus making money. Jim Cramer has a column today wherein he relates about having dinner with, in his words, one of the best hedge fund managers in the world. His friend chastises him for his support of Apple and can’t understand his support in light of the service of AT&T. What the hell does AT&T’s service have anything to do with the facts. In believing that it is somehow important, his friend, who I hope Cramer now realizes is probably one of the worlds worst hedge fund managers, has missed a move from $89 to $290 and shortly to be north of $300 per share. Any hedge fund manager who hasn’t been in Apple is not qualified to call himself one, period. You’re just a guy trying to beat the S&P, at the expense of your clients.

  94. tt says:

    if one had started buying gold in 2007 and stayed out of equities isn’t that a much better position to be in than equity longs, even with stellar trading like barry.

    i am just asking. gold was the trade of the decade. and one can still stay grumpy with no fear of jeff skilling or goldman sachs or merrill going bankrupt and your money gone.

    having gold coins in hand was the best trade financially and also for sleeping well, this past decade.

    and one can be grumpy yet satisfied all at the same time.

    yes barry?

  95. tt says:


    not to mention gold coins in hand would have made one sleep like a baby during 9.11.01 attacks and market reaction, the invasions and occupations, various bombings in london, madrid, bali………….

    gold would have made one sleep in panic of 08 too. so i would say that totally beat any equity account out there.

    the real question, barry is where is your money custodied. did you lose sleep in 08 it was safe. i slept like a baby with a pacifier, and i too manage money. bear stearns was my custodian.

    without gold, my blood pressure would have gone apeshit. i am sure the gold coins have added years to my life, and doctor and psychology bills.

    do you want to be right, make money or better yet, make money and sleep like a puppy.

    ps i was never a gold bug until the cracks started showing 5 years ago. should have listened to rogers and faber a decade ago.

  96. hdoggy says:

    Hi Barry:

    I’m a reformed crash junkie. I’m not comfortable with this market, but I’ve also decided not to care. I have more pressing needs like cash flow and my job and a dollar saved is dollar earned. Back to the basics. The only solace is that if this really is a trading range, both sides are equally as frustrated, one side just has the government and Fed on their side so betting against that either makes you a hero or a sucker. The allure of being a hero is not worth the price of worrying about things greater than us all if that costs us valuable time on bettering ourselves in the mean time.

    Love the blog, Scott

  97. Broken says:

    Would you rather be right or make money?

    Reminds me of the problem with hardcore liberals:

    They would rather be right than get elected.

  98. Broken says:

    “BR: We made money from March 09 til April 2010. Since then, we have mostly avoided losing money. Its been a good strategy.”

    My equity gains are back to end of March levels (not counting dividends), so if you are at end of April levels, my hat is off to you.

  99. Captain Jack says:

    Another way to ask the question is: “Does your intellect serve your P&L, or is it the other way around?”

    Seriously, a lot of people are not in the markets to make money. The pursuit of gain is subordinated to the pursuit of moral and intellectual validation. This is especially true of big gaudy call-makers, who invest themselves in saying “the markets are going to do X.”

    If you treat trading as a hobby, you will lose, because hobbies cost money. If you treat trading as a job, a profession, or an otherwise serious endeavor, then you eventually learn (via necessity) to compartmentalize the expression of moral and intellectual views.

    Think of how it works for most other white collar professionals. Do doctors and lawyers and engineers go emotionally off the rails during the workday? No — they save that shit for the bar, having drinks with their buddies afterward.

    As an aside, while long a devoted fan of Austrian economic principles, I believe it was a significant step forward in the overall maturation process when I stopped thinking of myself as an Austrian and simply became a trader…

  100. IvoZ says:

    So BR says that to be a trader you have to separate morality (doing the right thing for society, according to one’s beliefs of right and wrong etc.) and trading (e.g. according to what the tape serves you). This does not serve many people well, as some of them care more about doing the right thing accordign to their ideology and sleep well, and less about making the last buck possible

    Now there is another element here – BR seems to be a momentum trader and when his technical indicators tell him to be long, he follws. I do not think his calls are discretionary, they are based on some automated system. So his calls are totally devoid of morality and emotions.

    This approach is strange to some people, who think that the markets should be rational (based on what should be right), but they are not (e.g. see Soros’s recent speech). Of course the drift towards momentum and HFT means that the long-term “weighing machine” concept of markets gets lost ot a higher degree and this is correct to make a lot of non-daytrading people angry, who want to buy value and sleep well. And I agree with them. This is a prisoner’s dilemma: momentum is right short-term for every single player, but market credibility and stability is lost for all over the longer term.