Thread by @DougKass

@realmoney

Jul 08, 2020 | 08:05 AM EDT DOUG KASS
Anticipatory Investing
Yesterday I made the considered decision to raise my net short exposure to large-sized - I may be wrong, I may be right.
The investment mosaic, as I have often written, is a complicated one.

I wish, with nearly five decades of investing experiencing, I knew for sure that we were at or near a market top - but that is impossible. I didn't know the market bottomed in March for sure but I saw the indications.
I have learned to look for signposts. Those signposts, have

provided me with a guide to strategy.
Like my "fair market value" calculus, that assigns probabilities to 3-5 different economic and business scenarios - it becomes an "odds" bet to put it into betting jargon. As the difference between price and intrinsic value widens, upside

reward vs. downside risk deteriorates.
The current setup represents a confluence of conditions: of continued individual stock speculation by the retail community, expanding investor confidence (which is the outgrowth of rising prices since the March low) an "overbought" as well

as the many coincident and forward looking factors mentioned in yesterday's opening missive.
Given these factors and within the context of a 2500-3100 projected trading range and a 2750 "fair market value", I moved into a large net short exposure yesterday.
Some, ask...

why not wait? Why be anticipatory and not react to when market prices "tell us" the trend has changed?
There are a number of reasons why I am anticipatory.
To begin with, I average into prices - this provides an anticipatory investor with a way of "controlling" the risk that

stocks will continue to advance. I start small, using a funnel approach as the difference between value and prices widens - shorting more when stock prices are above intrinsic value and buying more when stock prices are at a discount to intrinsic value, as I did in March.

Essentially, margin of safety works "both ways". The cheaper one buys, the less risk - the higher prices are to short, again, less risk.
As well, market structure has resulted in - with greater frequency - price distortion and artificiality of prices which breeds opportunity.

We saw this in March and we might be seeing it today. Investing unemotionally and taking advantage of these distortions have proven to be profitable for me over time.
Finally, I manage investment portfolios of long duration assets with an intermediate term time frame -

I don't run a trading book with a time frame of a day or week.
The former tries to deliver longer term investing results and the later tries to deliver shorter term trading results.
Frankly, I am continually surprised that critics of anticipatory investing - who favor

reactionary trading by worshiping at the altar of price momentum - don't understand this core difference. @jimcramer @tomkeene @cnbcfastmoney @SquawkCNBC @carlquintanilla @riskreversal @terranovajoe @guyadami @michaelsantoli @threadreaderapp unroll