As you will remember, a pair trade is a trade that goes lengthy 1 side and short the other with the thought of capturing the variation in overall performance. www.hoanghaivan.org to body my existing favourite pair trade is “Wisdom” vs “Emotion”.
It is my hypothesis that a species’ evolutionarily productive emotional responses are codified in DNA as instincts. We also know that markets punish herd habits, because the herd can be spooked, and consequently dependable to overreact in times of peak agitation. This is why I like to evaluate volatility and explain it with statistics in these kinds of a way as it is the two secure ample for continuity and yet adaptive enough to reply to change in accord with deeper traits which are evolving underneath the area of immediate observation
In this pair trade Buffett plays the role of wisdom, the protoypical clever uncle who has observed it all, and knows how to body the difficulty and navigate by way of uncertainty. The latest, best ETF, the metaphorically exuberant youth in search of riches in the land of milk and honey, is represented by EEM (the emerging marketplaces.
There is a time for every in human existence cycle, in the passing of seasons, in the biking of marketplaces. Would we truly say that the exuberance of youth must be minimize out of our existence and experience? where would the ventures occur from? the entrepreneurship? knowledge is not everything, but it also has its time and location.
Just as we can expand and mature our judgement, so to can we bring various values and insights to bear as the market place morphs around us.
This is clearly Buffett time, however you slice it.