Brave enough to be right?

By: ispeculatornew
Date posted: 12.10.2008 (4:00 am) | Write a Comment  (0 Comments)

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It’s the first time I actually put up a video on here but it is well worth watching. Peter Schiff is the President of Euro Pacific Capital inc and he has been talking for over 2 years now about the current crisis and let’s just say that he did not get a great treatment when giving such tough predictions for the US economy. There are numerous videos of him and it seems he has been dead right about almost everything so far. The biggest miss I have seen is about gold (which I do not understand either as common sense would have predicted that a world crisis would pop up the price of gold.

But Schiff is still confident in that part as he has predicted oil could go up to as much as 2000$ as early as next year.

And again, no doubt, Schiff looks absolutely brilliant in retrospect and probably made a lot of money to all who listened to him (hopefully he walked the walk).

But that brings up other questions. Trading on fundamentals such as you would have done if listening to this advice can be very difficult. Let’s not forget that for months and perhaps over a year, the market did not go in his direction. The problem is that you must be able to give yourself enough margin for error to sustain losses if valuations do not come back to the correct level. But as in all bubbles, things always go a lot further than you could possibly imagine and that makes it a challenge to be able to sustain the positions.

Then of course lies another problem. If you are holding positions for fundamental reasons and the market is going against you, you will probably reason yourself that it will eventually revert back to what you see it should be. But at what point should an investor simply admit he was wrong and move on? The two problems are important challenges when trading on fundamentals and you can argue that such traders have to be able to tolerate important losses in order to be right in the end. But if that’s the case, positions must be small enough to be able to sustain such losses…

I actually know of a few such traders who had great visions of what was going to happen but actually were not able to profit because they eventually lost so much money that they were fired and never were able to come out on top, simply because their market vision was a few months too early.. tough job hey?

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