‘You think our country is so innocent?’ | Pres. Donald Trump

In another first for a US president, Donald Trump admitted that the United States government is not as innocent as his interviewer, like any other mainstream medium, would like to believe. “We’ve got a lot of killers.” – US Pres. Donald Trump O'Reilly: “Putin’s a killer.” Trump: “…we’ve got a lot of killers. What do … Continue reading ‘You think our country is so innocent?’ | Pres. Donald Trump →

Source: Geopolitics – ‘You think our country is so innocent?’ | Pres. Donald Trump

The Death of London’s Roman Empire | Lyndon H. LaRouche, Jr.

In earlier published reports, I had warned, in one way or another, that the Roman empire, which is represented presently by the terminal conditions of the hyper-inflated British empire, has reached the fag end of its tyrannies, in one manner or another. by Lyndon H. LaRouche, Jr. January 10, 2011 In earlier published reports, I … Continue reading The Death of London’s Roman Empire | Lyndon H. LaRouche, Jr. →

Source: Geopolitics – The Death of London’s Roman Empire | Lyndon H. LaRouche, Jr.

These 10 magazine covers expose the liberal left’s propaganda movement to overthrow President Trump

It’s obvious that the cover went too far when displaying its hate for President Trump, but the cover’s purpose, and ultimate goal, is shared among many neo-liberal left and neocon right publications…to remove Trump from the Office of POTUS. To compare even indirectly and in a cartoon cover Donald Trump’s ‘travel ban’ Executive Order with the murderous barbarism of ISIS and of other Jihadis is not merely ridiculous; it is also deeply offensive.

Source: Blacklistednews – These 10 magazine covers expose the liberal left’s propaganda movement to overthrow President Trump

"Is Trump About To Cause Another Crisis?": 2008 Could Be Eclipsed As Bank Restrictions Eliminated

Submitted by Mac Slavo via SHTFPlan.com,
Beware of what may be coming next. We already know the establishment has a plan to blame President Trump for the next financial crisis, and now there are moves being made that will support that narrative.

After the 2008 fiasco, a spotlight on Wall Street misbehavior and some weak, but better-than-nothing regulations were put on the industry in the hopes of preventing another string of bank failures and crippling economic disasters.
But as the system teeters on edge and prepares to endure the backlash of increased rates at the Fed, Trump is also taking off the shackles that have been put in place by the Dodd-Frank Act which instituted certain protections for consumers, including a requirement that pensioners don’t have their nest egg devoured, etc.
For the tens of millions of baby boomer retirees and aging pensioners, the social security net is all they’ve got to count on, apart from a few debt-saddled kids who have hardly been able to save a dime under eight years of Obama.
The 2008 economic crisis penalized everyone with an entire cycle of wage freezes, job starvation and crushing dependence upon government programs for assistance. Wall Street, and the banker class at large were spared from blame or reparations to a society that was robbed blind. Instead, eight years of quantitative easing sent a tidal wave of easy money to the financial sector that created a gorge of asset buy-up from the top – especially in housing, where soaring rates are forcing single households to become renters instead of mortgage debt-slave owners once again.
The election of President Trump created optimism about our collective financial prospects – with seemingly tangible promises of bringing home jobs and returning to American Greatness™. But the banksters also cheered his election; stock markets shot upwards in celebration. Key positions in the White House were offered to Goldman Sachs men and others of their ilk.
Now, President Trump has issued an executive order that has Wall Street once again self-congratulating for backing the right man. The order is expected to gut protections that currently require financial products sellers
As the London Independent reports:
Donald Trump is expected to order a review of the Dodd-Frank Act, which was implemented in the aftermath of the 2008 financial crisis to prevent a repeat of the worst financial crash since the Great Depression.
[…] council has the right to break up banks that it thinks could pose a systemic risk to the global financial order. It also has the ability to demand that banks hold higher reserves, or cash buffers, to minimise a squeeze. Separately, the Dodd-Frank Act also created the Consumer Financial Protection Bureau, to oversee consumer financial products, such as mortgages.
A key part of the Act is the Volcker Rule, which restricts the way that banks are allowed to invest and places restrictions on speculative trading. It also restricts banks from engaging in so-called proprietary trading, or trading for the firm’s direct gain, instead of on behalf of a client.
So in effect, the rule is designed to separate the investment and commercial businesses of banks.

It seems clear enough that this move benefits many of those at the top of the pyramid, but a Bloomberg report directly quoting from senior leadership on Wall Street, and now inside the Trump Administration, makes crystal clear that the intentions are quite self-interested:
Chief executives including Goldman Sachs Group Inc.’s Lloyd Blankfein and JPMorgan Chase & Co.’s Jamie Dimon have been pushing for changes for years, arguing that the industry has been too constrained by the system put in place by the 2010 Dodd-Frank Act. After Trump focused on limiting trade and immigration during his first two weeks in office — policies opposed by many in the financial industry — the president’s stroke of a pen unleashes a process to undo many of the rules they find most irksome.
“We’re going to attack all aspects of Dodd-Frank,” Gary Cohn, director of the White House National Economic Council, said Friday in an interview with Bloomberg Television. “We are going to engage the House, we’re going to engage the Senate. They are equally interested in reforming some of the regulatory processes as well. We can do quite a bit without them, but the more help we get from Congress the better off we’re all going to be.”

Not necessarily the brightest news for the people.
Though it isn’t immediately obvious that this change in the rules would cause immediate trouble, there is reason for concern. If the limitations – inadequate as they were – are lifted off the banks, specifically with investing in commercial banking and with pensions, things could once again take a turn for the worse.
If the same reckless behavior is repeated, it could not only bring the system to a halt, and crash the stock market, but it could potentially wipe out the holdings of those who need it most – pensioners.
Meanwhile, defaults and the burden of a debt-supercycle are also threatening to topple the system. One way or another, the next era will have to handle enormous risk of total economic crisis.
As the Independent notes:
Does this mean we’re at risk of facing another financial crisis? Some economists have even been bold enough to say that getting rid of Dodd-Frank could indeed pave the way for another crisis.
What makes matters a lot worse, is that many experts believe that global financial systems and economies are more vulnerable now than they were ahead of the last financial crisis. So if we do suffer another major crash, the damage has the potential to be a lot more grave.
Central banks around the world have already slashed interest rates to record lows leaving them with limited ammunition to do more to stimulate economic growth. Government debt has also sky rocketed over the decade since the last crisis.

Whatever comes next, there is a toxic cycle that is waiting to crash down upon us with a tsunami of financial misfortune.
Federal Reserve policies in the wake of the last crisis set up the American people for a very bad fall. Economic vibrancy among the middle class and general population has been sucked dry, and they will be ill prepared to handle a new crunch in credit and possible hyper inflationary/deflationary crisis.
Trump’s pro-business, pro-American policies may help if they are instituted correctly, but enabling the financial sector to once again prey upon people and fuel the rise-and-collapse of a massive series of bubbles and a derivatives WMD is not a healthy option.
The stage has been set for a nightmare that we must pray never comes.

Source: Zerohedge – "Is Trump About To Cause Another Crisis?": 2008 Could Be Eclipsed As Bank Restrictions Eliminated

"Davos Man Is Dead" – Trump's EU Ambassador Slams Out Of Touch Elites

As prominent MEPs are slamming US President Donald Trump's choice for ambassador to Brussels, RT’s Afshin Rattansi sat down with Ted Malloch for his personal views on the matter.

RT: The EU parliament is somehow trying to veto your appointment as the next ambassador to the European Union. What is your reaction?
Ted Malloch: They must not have got the notice that Donald Trump won the American election. Of course, ambassadors are chosen by their home countries to represent those countries and those national interests in foreign capitals, in this case, in Brussels.
RT: Is it symptomatic of the fact that European politicians don’t really understand their power relations with Washington?
TM: I think there is some sense of that. But there is also an inkling, particularly in some leftist political circles in Europe, to wish Trump away or to think that in four years they might have Obama back or basically to call me things like ‘malevolent’  which actually requires a theory of ‘good and evil,’ which they don’t have.
RT: How out of touch are elites continuing to be in European capitals and the MSM when it comes to Trump?
TM: I don’t think it is just Europe. It is certainly the case around the world. The Davos Man is dead. We had the Davos World Economic Forum the other week and of course they had a lot of has-beens there. The keynote speakers were all people who were leaving office, for example, US Secretary of State John Kerry. Xi Jinping was their poster boy for globalization, and in effect, China has been a beneficiary of globalization. The 300 million jobs that were created in China was a significant economic fact, but lots of those jobs were taken out of the hallowed places of Western Europe and Middle America.
RT: In the diplomatic world, Britain’s ambassador to Washington, Sir Kim Darroch, believes that “Trump inexperience will be able to be exploited by the UK.” Wise for Britain to have a diplomat there that thinks like that? 
TM: Good luck. Of course, facetiously, Donald Trump suggested that someone else be the ambassador to the UK, obviously that didn’t come to fruition and wasn’t going to happen. Everyone underestimated Donald Trump this entire past year and a half. Seventeen political candidates and Republican primaries, Hillary Clinton, the most experienced, seasoned pro in American politics – what happened to all of them?


Source: Zerohedge – "Davos Man Is Dead" – Trump's EU Ambassador Slams Out Of Touch Elites

Gorsuch May Not Shift The Balance Of Power On The Supreme Court As Much As You Think

Submitted by Michael Snyder via The Economic Collapse blog,
On Tuesday, President Trump announced that he would nominate Neil Gorsuch to fill the open seat on the U.S. Supreme Court.  Gorsuch currently serves on the 10th U.S. Circuit Court of Appeals in Denver, and he was confirmed unanimously by the Senate when he was appointed to that position by President George W. Bush in 2006.  Gorsuch appears to have some strong similarities to Antonin Scalia, and many conservatives are hoping that when Gorsuch fills Scalia’s seat that it will represent a shift in the balance of power on the Supreme Court.  Because for almost a year, the court has been operating with only eight justices.  Four of them were nominated by Republican presidents and four of them were nominated by Democrats, and so many Republicans are anticipating that there will now be a Supreme Court majority for conservatives.
Unfortunately, things are not that simple, because a couple of the “conservative” justices are not actually very conservative at all.
For example, it is important to remember that Scalia was still on the court when the Supreme Court decision that forced all 50 states to legalize gay marriage was decided.  Justice Anthony Kennedy joined the four liberal justices in a majority opinion that Scalia harshly criticized.  So with Gorsuch on the court, that case would still have been decided the exact same way.
Sadly, even though Kennedy was nominated by Ronald Reagan, he has turned out to be quite liberal.  In the past, not nearly enough scrutiny was given to justices that were nominated by Republican presidents, and a few of them have turned out to be total disasters.
And let us also remember that Scalia was still on the court when the big Obamacare case was decided.  Chief Justice John Roberts joined the four liberal justices in a decision that was perhaps one of the most bizarre in the modern history of the U.S. Supreme Court.
For some reason, Justice Roberts was determined to preserve Obamacare, and if you read what he wrote it is some of the most twisted legal reasoning that I have ever come across.
As someone that was once part of the legal world, let me let you in on a little secret.  Most judges simply do whatever they feel like doing, and then they will try to find a way to justify their decisions.  So if you ever find yourself in court, you should pray that you will get a judge that is sympathetic to your cause.
Fortunately, Gorsuch appears to be one of the rare breed of judges that actually cares what the U.S. Constitution and our laws have to say.  In that respect, he is very much like Scalia…
Gorsuch is seen by analysts as a jurist similar to Scalia, who died on Feb. 13, 2016. Scalia, praised by Gorsuch as “a lion of the law,” was known not only for his hard-line conservatism but for interpreting the U.S. Constitution based on what he considered its original meaning, and laws as written by legislators. Like Scalia, Gorsuch is known for sharp writing skills.
“It is the role of judges to apply, not alter, the work of the people’s representatives,” Gorsuch said on Tuesday at the White House event announcing the nomination in remarks that echoed Scalia’s views.

One of the most high profile cases that Gorsuch was involved with came in 2013.  That was the famous “Hobby Lobby case”, and it represented a key turning point in the fight for religious freedom.  The following comes from CNN…
In 2013, he joined in an opinion by the full Court of Appeals holding that federal law prohibited the Department of Health and Human Services from requiring closely-held, for-profit secular corporations to provide contraceptive coverage as part of their employer-sponsored health insurance plans.
And although a narrowly divided 5-4 Supreme Court would endorse that view (and affirm the 10th Circuit) the following year, Gorsuch wrote that he would have gone even further, and allowed not just the corporations, but the individual owners, to challenge the mandate.

Donald Trump said that he wanted a conservative judge in the mold of Scalia, but I think that he was also looking for someone that he could get through the Senate.
And considering the fact that Gorsuch was confirmed unanimously by the Senate in 2006 will make it quite difficult for Democrats to block him now.  Gorsuch has tremendous academic and professional credentials, and he will probably have a smoother road to confirmation than someone like appeals court judge William Pryor would…
Trump may have favored Gorsuch for the job in hopes of a smoother confirmation process than for other potential candidates such as appeals court judge William Pryor, who has called the 1973 Supreme Court ruling legalizing abortion “the worst abomination of constitutional law in our history.”

But Pryor is still reportedly on the short list for the next spot on the Supreme Court that opens up, and by then the rancor in the Senate may have died down.
If Gorsuch is confirmed, what will this mean for some of the most important moral issues of our time?
As for abortion, even if Gorsuch is confirmed I do not believe that the votes are there to overturn Roe v. Wade.  But if Trump is able to nominate a couple more Supreme Court justices that could change.
But even if Roe v. Wade is overturned, it would not suddenly make abortion illegal.  Instead, all 50 states would then be free to make their own laws regarding abortion, and a solid majority of the states would continue to keep it legal.
The analysis is similar when we look at gay marriage.  If the Supreme Court decision legalizing gay marriage in all 50 states was overturned, each state would get to decide whether gay marriage should be legal or not for their own citizens.  And just like with abortion, it is likely that only a limited number of states would end up banning gay marriage.
So the nomination of Neil Gorsuch to the Supreme Court appears to be a positive step, but it does not mean that we are going to see dramatic change when it comes to issues such as abortion or gay marriage any time soon.
But at least Gorsuch can help stop the relentless march of the progressive agenda through our court system.  So in the end we may not make that much progress for right now, but at least the liberals won’t either.

Source: Zerohedge – Gorsuch May Not Shift The Balance Of Power On The Supreme Court As Much As You Think

TEPCO Admits Fukushima Radiation Levels Reach Record Highs As Hole In Reactor Discovered

With just 3 years left until the 2020 Olympics, Japan is likely desperate to reassure the world's athletes that all is well, but an admission from TEPCO – the Fukushima nuclear plant operator – that they discovered a hole at least one square meter in size beneath the reactor's pressure vessel, and lethal record-high radiation levels have been detected, will not likely reassure anyone.

Radiation levels of up to 530 Sieverts per hour were detected inside an inactive Reactor 2 at the Fukushima Daiichi nuclear complex damaged during the 2011 earthquake and tsunami catastrophe, Japanese media reported on Thursday citing the plant operator, Tokyo Electric Power Company (TEPCO). A dose of about 8 Sieverts is considered incurable and fatal.

As RT reports, a hole of no less than one square meter in size has also been discovered beneath the reactor's pressure vessel, TEPCO said. According to researchers, the apparent opening in the metal grating of one of three reactors that had melted down in 2011, is believed to be have been caused by melted nuclear fuel that fell through the vessel.
The iron scaffolding has a melting point of 1500 degrees, TEPCO said, explaining that there is a possibility the fuel debris has fallen onto it and burnt the hole. Such fuel debris have been discovered on equipment at the bottom of the pressure vessel just above the hole, it added.
The latest findings were released after a recent camera probe inside the reactor, TEPCO said. Using a remote-controlled camera fitted on a long pipe, scientists managed to get images of hard-to-reach places where residual nuclear material remained. The substance there is so toxic that even specially-made robots designed to probe the underwater depths beneath the power plant have previously crumbled and shut down.
However, TEPCO still plans to launch further more detailed assessments at the damaged nuclear facility with the help of self-propelled robots.

TEPCO confirmed a black lump in the space beneath the pressure vessel. There is a possibility of nuclear fuel melting down (fuel debris). If it is fuel debris, it will be the first time that fuel melted down will be taken after the Fukushima Daiichi nuclear accident.

Source: Zerohedge – TEPCO Admits Fukushima Radiation Levels Reach Record Highs As Hole In Reactor Discovered

The Market Wizard's Wizard – An Interview With Jack Schwager

Submitted by Erico Matias Tavares via Sinclair & Co.,

Mr. Schwager is a recognized industry expert in futures and hedge funds and the author of a number of widely acclaimed financial books. He is one of the founders of FundSeeder, a platform designed to find undiscovered trading talent worldwide and connect unknown successful traders with sources of investment capital. Previously, Mr. Schwager was a partner in the Fortune Group (2001-2010), a London-based hedge fund advisory firm. His prior experience also includes 22 years as Director of Futures research for some of Wall Street’s leading firms, most recently Prudential Securities.

Mr. Schwager has written extensively on the futures industry and great traders in all financial markets. He is perhaps best known for his best-selling series of interviews with the greatest hedge fund managers of the last three decades: Market Wizards (1989, 2012), The New Market Wizards (1992), Stock Market Wizards (2001), Hedge Fund Market Wizards (2012), and The Little Book of Market Wizards (2014). His other books include Market Sense and Nonsense (2012), a compendium of investment misconceptions, and the three-volume series, Schwager on Futures, consisting of Fundamental Analysis (1995), Technical Analysis (1996), and Managed Trading (1996). He is also the author of Getting Started in Technical Analysis (1999), part of John Wiley’s popular Getting Started series.

E Tavares: Jack it is a pleasure and an honor to be speaking with you today. You are a reference, even sort of like a guru for us in the futures / commodities industry. Throughout your work – and we read much of it – you seem to have a slight preference for trading futures over stocks and bonds. Is that right, and if so why?
J Schwager: That’s absolutely true. First of all, I got into the industry as a commodities analyst. There were no financial futures, which now dominate the markets, in those days. Two years as an analyst then 22 years as director of futures research for several firms, with several years designing trading systems along the way. Much of that continues in different shapes and forms, so the bulk of my professional career has been in futures. That’s the primary reason for me.
The stock trading that I do has been sporadic. It’s very different from my futures trading, which basically consists of trades with stops to control risk. In stocks I will be much more contrarian, looking to buy things when they have been out of favor, at low or pummeled prices. Not because I know much about the underlying fundamentals, just that it’s a type of business where I believe the long-term downside is very limited irrespective of the technical/price chart patterns, and there is much more upside than downside.
For example, in late 2008 I had no idea when the whole collapse in the equity markets would end but it seemed to be the classic panic. So I looked to buy very long-term out of the money LEAPS (call options) in things that were totally crushed, like FXI (China ETF) or XME (Metals & Mining ETF). They were trading so low that it was unlikely they would lose much more value from there. I did not have any stops even if the whole thing went to zero so it is quite a different way of trading from futures.
In fact it’s a complete 180 degrees different. For me futures is more like trading and stocks is more contrarian, long-term investing…
ET: … like value investing?
JS: Sort of, although I don’t do all the related fundamental work. That’s not my forte. But I look at things like prices hitting fifteen, twenty years lows, it’s a pure panic, commodities will not go out of favor, China and India will continue to grow, and so forth. So it makes sense to buy now and put it away for a few years. And if it goes to zero it goes to zero.
If XME goes from 50 to 12, it can go anywhere but I figure that at 12 it probably will not go much lower, but not because I have done any fundamental work.
ET: You just published a new edition of A Complete Guide to the Futures Market, which we can’t recommend enough. The first edition came out in 1984 and was already considered to be a seminal book on the subject. What prompted you to write a second edition more than thirty years later? Is it because the markets have fundamentally changed and as such the materials needed an update?
JS: No, the catalyst was the publisher! They bugged me throughout the 1990s to do an update and I finally balked once they threatened to get somebody else to do it. Once I got started I ended up turning it into three volumes and 1800 pages.
Then they wanted another update but just in a single volume. I finally agreed but at that point started working with a co-author that I respect a great deal, and just went over his revisions. The original 1984 book was still relevant; in fact without wanting to sound immodest it was very good. I thought I did a good job the first time around. However, today nobody is going to read a book that is over 30 years old. I thought it was a shame to let it go by the wayside when ninety percent of it was still pertinent and the rest could be easily updated.
There were no real meaningful changes to the first edition other than market updates, expansions in some topics and contractions in others. There were no analytical approaches that I thought were wrong now. Actually, hardly anything of substance needed to change.
So the book was still pertinent, it just needed to be revised and updated and a new edition was necessary to bring it to the attention of a new readership.
ET: Picking up on the analytics point, markets do evolve over time right? As such systems need to adapt. Perhaps a good example might be the famed Turtles system, which supposedly produced many millionaires almost a generation ago, but seems to be much less applicable today. Do these market changes prompt you to revise your techniques from time to time?
JS: That’s absolutely true but in the original book, while I did not cover the Turtle system per se, I did talk about broader trend following systems which are still applicable today. Back in the 1970s and 1980s these systems used to work extremely well but as more and more people started to use them they lost their efficacy, like anything else.
However, my approach in the whole book was not to say “this works absolutely”. Instead, I explained why a system worked. If you are going to do systems development you need to strictly avoid hindsight otherwise the results will be meaningless. All of that is still pertinent today. The systems I presented then worked, but I chose them primarily for illustration purposes.
When you get down to the particulars, like the exact signals, you are quite right – these tend to change over time. You have to be willing to adapt as a result. What doesn’t change is the appropriate methodology for developing, testing and implementing systems. What also remains true is the types of inputs that you might use. Yes, markets change but the broad principles and methodologies to me did not seem like they needed a lot of change.
That’s on the technical side. It’s really the fundamental approaches that changed the most because markets tend to go through these structural changes and such fundamental models can quickly lose their efficacy.
ET: Related to that, perhaps as an effort to keep traders aligned with the evolution of the market one of the sections of your book covers the development of systems for futures trading, an area that attracts a lot of interest these days, since most people now have access to enough computing power and market data to do all sorts of analyses.
However, when retail traders go into the market they are up against hyper sophisticated funds which most likely have examined all profitable combinations ahead of everyone else. Some can even execute trades much faster. So how can those retail traders have any chance of competing successfully in the market, meaning being consistently profitable over time? Are there areas like picking longer timeframes, higher risk tolerance and so forth that can give them an edge over the big players?
JS: You are probably talking about a sophisticated retail trader, someone who has experience and know what they are doing, meaning having an edge and a methodology with good risk management. In other words, someone who has a reason to be trading which in my opinion excludes the majority of people, who don’t have any of that. They are better off not trading at all.
In that sense, how does such a trader compete against the super firms with not only tremendous computing power but also teams of PhDs? You can’t beat the likes of Renaissance and DE Shaw at their own game. They are using super sophisticated and effective quant strategies. You can’t do it that way.
But the retail trader may have an approach that works. There are so many different possibilities and combinations that people can still come up with something that works. This is very possible although much more difficult compared to the 1980s for instance, let alone the 1970s.
The other distinction I would make is between systematic and discretionary trading. It is probably more difficult for a retail trader to excel using a systematic approach but I think a large percentage of them would fall under the category of discretionary. That’s where I think there still is quite a bit of room to be profitable with reasonable risk control.
Let’s say that a trader is making discretionary decisions based on charts. You can program some patterns, like a breakout or even a more complicated head & shoulders formation, test a mechanical approach based on that and you will probably come up with something that is not that great. However, the human mind is actually extremely good at finding patterns, to the point where certain people who have a particular skill in noticing them – especially at the subconscious level through intuition – are able to use them as a signal that would otherwise be missed in a pure mechanical system.
In that sense, as an example, it’s not that the market is forming a flag pattern, but rather that it is forming that pattern in a broader context with some other chart features that improves your edge. Then you go in with a stop to control your risk, and you can very much compete against the big funds with that approach.
Also, the retail trader has one big advantage over the big funds and that is size. It is a lot easier to trade and put in stops when you are trading small size as opposed to when you are trading billions or even hundreds of millions of dollars.
ET: What about timeframes? It seems longer is better for the smaller investor.
JS: Not necessarily. That depends on the individual methodology of each trader. However, if you are thinking in terms of conventional things like trend following, then you are correct.
I think I had in the original edition of the book, but is certainly there in the current edition, the concept that longer trends are more reliable. In other words, longer term crossovers perform better than shorter term ones. And there’s a very good reason for that: they are very difficult to trade. Markets tend to punish traders who employ easier approaches and reward those willing to suffer some pain.
The idea is that yes, when you use a long term approach it is true that you are getting in much later on a trend and you also surrender a much larger portion of open profits when you are right – and not many people are willing to go there since both are painful things. However, it is also true that shorter term systems give you so many back and forth whipsaws – and you can test this empirically over time like I did – that on balance you are worse off. Those whipsaws more than offset the larger gains from getting in earlier and the smaller surrender of profits from getting out earlier.
In that sense trading over a longer horizon has more efficacy, but emotionally it is a very difficult thing to do.
ET: In the book you describe in detail various trading approaches, including technical and fundamental. And while expressing some preference for the former you suggest that it is up to traders to find what works for them. This is a crucial point that is often forgotten.
JS: When I give talks about trading and lessons from Market Wizards one of the foremost points I make, maybe the first point about what you should do, is the need to find an approach that works for you. That’s going to be different for everybody. So many people don’t realize that. They try to chase the best methodology or learn from somebody else.
It’s like you can have the most expensive suit but if it’s from someone who is not your size you will not look good in it. It’s much better to have a cheaper suit that fits you. It’s the same thing with trading. You can’t make someone else’s trading methodology work for you. Everybody has their own skills, preferences, biases, emotional strengths and weaknesses and all those traits suggest having a different approach for each person.
This is matter of trial and error and being conscious of what seems to work, what you are comfortable with, what you believe and so forth. Some people should use just technical, other just fundamentals and others a combination of the two. I can’t really tell anybody what would work for them – that's a question only they can answer.
ET: What really moves the markets in your opinion? Some people say it’s just a random walk, a coin flip, and so impossible to make money since it is very hard to figure out if the next flip will be heads or tails. Others say there is a hidden structure, at least during certain time periods, and with enough education and determination you might be able to figure it out. Who is right?
JS: If the random walkers are correct, all market participants are wasting their time because you can only make money if you are lucky. It also means that I wrote four Market Wizard books about a bunch of very lucky people. There are many reasons as to why there is something else at play. In fact, I wrote a whole chapter on this in another book, Market Sense and Nonsense, debunking the random walk theory.
Now, the markets behave like they are random or have a lot of randomness to them. That part is true. But what is generally wrong about the random walk theory is that, first of all, the idea that everything is discounted and fully reflected in the price at all times, and therefore nobody can make money, is demonstrably false.
I’ll give you a recent example, in addition to the many I outlined in that chapter. It’s one of my favorites and it’s from a recent talk by Richard Thaler, the renowned behavioral economist. There is a closed end fund with the ticker CUBA (like the Caribbean island), which like most closed end funds usually trades at a 15-20% discount to the value of the basket of securities that compose it. And then in one day all of the sudden it skyrocketed up to a 70% PREMIUM. What could have happened?
Well, President Obama had just given a speech that he would normalize relations with Cuba. Now, CUBA did not hold any Cuban securities for two reasons: 1) there were no Cuban companies to invest in; and 2) even if there were it would have been illegal to do so. It did hold some South American companies, but nothing directly in Cuba!
So you had this huge change in one day in the price of the fund when none of its securities were directly affected by the catalyst causing the price surge. And of course a couple of days later the price went back to the prior levels.
There are so many other examples. Take the internet bubble. You have this sixfold share price rise in one and a half years then back to the original prices in one and half years. But there were no major news developments that satisfactorily explained the moves in either direction. During the advance, there was a market euphoria and a buying-at-any-price mentality because people were afraid of missing the bull market. Then the music stopped and everybody is looking for a chair and there are no more chairs around. Once the buying fever broke, prices collapsed because the gains were never justified in the first place.
And the random walk theory is wrong because it misses a tremendously essential component of the markets and that is human emotion. It does not play a major role all the time, but when it does it can cause massive dislocations.
However, it doesn’t mean it’s simple. The irony is that while I believe the efficient market hypothesis is wrong, it is still very difficult to beat the markets. In early 1999 you could have said that the market was experiencing a bubble and that one should go short, and you would have been absolutely right. But when the market finally topped out in March 2000, you could have gone bust by then. So you can have markets be non-random and yet be very difficult to beat. And that is what fools many people into believing that they are random.
It’s also a fault in logic. The converse of a true statement is not necessarily true. You can say that because markets are random they are difficult to beat. However, the converse – markets are difficult to beat and therefore the markets are random – is a flaw in logic. It is true that all polar bears are white mammals, but not all white mammals are polar bears.
ET: Over the years you have interviewed the best in the business, the Market Wizards. These guys are truly amazing but there is one question that has always intrigued us, appreciating how hard it is to make it in the markets, as you just described. How can you truly distinguish luck from excellence, since both play such a significant role in speculation?
For example, statistically speaking it is very unlikely to have twenty flips that all come out heads, but with enough people flipping coins there will be a very small group who will do it. Without this perspective you could get the erroneous idea that they really know how to produce heads. How can you distinguish those lucky flippers from investors who happened to be profitable over, say, twenty years? In other words, couldn’t the Market Wizards be more a product of chance than a particular trading approach, especially as markets continuously change?
JS: Yes, in most cases it is very difficult to figure that out. Just because someone has done well for ten years or even twenty years doesn’t guarantee that they weren’t just lucky over that period.
If you have 1024 people flipping 10 coins, on average, you can expect one of them to toss 10 heads. However, even if you had every person on earth flip 200 coins instead of ten, what are the odds that one of them will get 195 heads? That’s going to be infinitesimal small. 
I’ll give you an example. The first fund of Edward Thorp ran for 19 years, with only three losing months during all that time, and all of them less than a 1% loss. The gains were much larger than the few losses that occurred. Using a binomial loss-win distribution to gauge the probability of his performance is actually very conservative because his wins were much larger. But even with that conservative approach, the probability of achieving Thorp’s record is actually significantly less than the probability of randomly picking the same atom twice out of the mass of the Earth.
So there are people out there who have records that are so lopsided, so preposterously skewed towards winning, that evidence of skill is very strong. DNA evidence probabilities are in the order of a few billion to one, but here we are talking about extraordinarily greater odds. So track records such as Thorp’s would be impossible if there were not non-randomness in the markets. 
ET: That is very interesting. And actually very relevant for your FundSeeder venture, since we believe the goal is to find the best trading talent out there that would have otherwise remained hidden, correct?
JS: Yes, although you need a long track record to demonstrate that irrefutable evidence of skill. However, while finding people who can deliver superior return-to-risk – our key measure of performance, as opposed to just returns – based on a daily basis (which is statistically far more significant than the conventional use of monthly data) may not guarantee that they are skilled you will have some assurances that this is a person who more likely than not has skill. It doesn’t prove it though. For that you need a very long track record.
ET: Yes, but at the same time we are reminded of how past results don’t guarantee future results. This means that if you pick a trader based on a great performance over the last, say, 5 years, even if you use the most refined risk-adjusted returns measurements all that can easily change on a dime going forward.
So how can you navigate through all this and reach a solid, informed decision on trading performance? Or, rather than results, are traits like consistency, a good trading plan, risk management and so forth the key differentiator for you?
JS: That cliché remains absolutely true. But there are a couple of elements to it.
If you are talking about strategies that correlate to sectors, indexes or hedge fund style, a good past performance in the past can actually be an indication of potential poor performance in the future. In my book Market Sense and Nonsense, I empirically showed that for these strategies investing in the worst performers over the past 1, 3, and 5 years actually does better than investing in the best.
So not only do I agree with the contention that past superior performance does not necessarily imply superior future performance, the relationship is often inverse. My qualification here is that it depends on the strategy. Those strategies that correlate significantly with sectors, indexes, or specific hedge fund styles can become overbought and oversold as we talked about earlier, hence the tendency for a reversal in performance.
However, I want to separate this situation from a trader who is uncorrelated to any index, sector or hedge fund style. For that type of trader superior return/risk performance could indicate trading skill as opposed to reflecting a portfolio in a sector of strategy style that has become overbought. While even then you can’t say that past performance is predictive, if you are going to look for good traders, it certainly makes more sense to focus on those who have been successful. There is no rationale for assuming a trader who has not done well in the past will suddenly start doing well. 
So you might as well focus your research on those who have demonstrated that ability. Then, as you suggest, you have to evaluate other things more carefully, like why they have done well, what their edge is. For example, someone with a great risk-adjusted return might have employed a strategy of selling way out-of-the money puts on equities since late 2008. That strategy would have produced great return/risk performance, almost like a money machine, but the trouble is that type of strategy also embeds a large tail risk. So even though the track record of this strategy would show low volatility, there would be the risk of catastrophic losses if there were another abrupt market selloff as in 2008 or 2000.
So you have to take into account exposure to event risk. Ironically, many strategies with low volatility are the most susceptible to event risk. For these strategies you can have low volatility, low volatility, low volatility… and then all of the sudden extraordinarily high volatility.
If there was no adverse event in the track record, you can end up with very misleading conclusions if you don’t account for this. I only look at risk-adjusted returns to select from a larger universe and then I take a deeper look into the associated strategies. 
ET: Finally, there’s this somewhat inspirational belief that if you do well in the industry at some point you can trade for a living – from your mansion at the beach sipping daiquiris. You have met so many people over the years. Do you know any smaller investors that live exclusively from market speculation, or is this just a mirage used to suck people into the markets?
JS: Sure. I’ll just provide one example because he is a friend. Peter Brandt started trading some forty years ago, starting at Commodities Corp, a firm that hired proprietary traders back then. He then left after some years and ended up trading his own account for the rest of his career. Not managing other people’s money but living off his trading income, making money consistently over the years.
That’s the trader you just described. He doesn’t use any powerful computers. He’s just an experienced chart analyst with good risk management discipline. He hasn’t won every single year although he has been profitable most of the years. He has lived his entire life like that.
ET: One major drawback regarding that lifestyle is that not having a steady income stream on the side could really affect your psychology because your heightened emotions might get in the way. The pressure to make money can really throw you off track.
JS: That’s a great point. I have never put myself in a situation where my livelihood depends exclusively on trading. I trade sporadically. Sometimes I trade, sometimes I don’t. I have never entertained any thought of trading for a living. It is more of a hobby than anything else. But I believe that if I tried doing it for a living I would fail because I couldn’t handle the emotion of your living expenses coming out of trading. So it does require a special kind of person to be able to do that and only a small percentage of people can do that.
If I had enough money to live comfortably for the rest of my life then I might be able to do it. But if I had a cushion that would only last two or three years, I’m pretty sure my emotions would eventually sabotage me. So that would not be a good idea. This is actually a very important point.
ET: Thank you very much for sharing your insights. It sure has helped us and we’re sure many, many other people over the years. All the best to you
JS: Thank you.


Source: Zerohedge – The Market Wizard's Wizard – An Interview With Jack Schwager