Thread by @mikeharrisNY

Thread now that the market is closed. 🚀

Let's talk about going short after another permabear fund announced shut down.

But before that, I'll talk briefly about going to the casino. It's related in a way.

I don't like casinos because I don't like to be around so many losers. The energy is bad. Casino players essentially go short the casino with tiny odds to win.

Last time I visited one was many years ago. I made windfall profits with a martingale system playing the roulette.

I cashed the ships and tried to get out. A few waitresses blocked my way offering free drinks and a man in black suit offered me a room at the hotel. I had to find an exclude to leave as the pressure to stay was mounting. Why? Because they knew if I stay long enough, I'd lose.

But I knew that also. I haven't been to a casino since. Why? Because if I go back there chances are high I will return some or all of the profits I made going AGAINST them.

End of story. Shorting stocks and being permabear is going against the casino. A few people are lucky.

These lucky people, like those who "predicted" the 1987 crash, or "the real estate crisis" in 2008 wrongly attribute one-time windfall profits to some skill. The point is even if they had skill FOR THAT PARTICULAR EVENT, they may not have the skill for a different event.

I remember those Elliott Wave traders of the 80s who expected a market crash in mid 90s that never came. Then those 2008 winners that expected a crash every year after 2010 that never came other than the pandemic one followed by a quick recovery. It's an exercise in futility

In 25+ years of quant trading strategy research and development I was never able to find one consistent short-only strategy in any market. Profits are due to chance and lucky ones make huge mistake to attribute it to skill they can replicate in the future. Take the money and run.

Money in the markets is made slowly and in discipline way using a high Sharpe strategy with low volatility and by using some margin. Chasing stocks to short or trying to time the market for that left tail event by constantly buying convexity is too costly.

Instead of chasing windfall profits from a short it's better making as much as possible from the long side and then getting out even with small loss when turmoil starts. You can work in the garden, read some books or learn a foreign lang while some suffer from the short squeezes.

Principle in trading: Never try to return to "crime scene". They are waiting for you. They will take every single penny you have. Remember those XIV short volatility traders who thought they were printing money in 2017? Most ended up broke in a day. It only takes minutes.

Conclusion: Luck cannot be replicated. Windfall profits are once in a lifetime events for most people in the markets. Take the money and run and never make the mistake to think it was skill.

*chips* and *find an excuse*