The Biderman Market Theory says that in all markets there is the house and then there are the players. I have talked a lot about the house in the stock market casino on many of these videos, particularly that the house, the public companies, have an advantage over the players.
I rarely talk about the players and perhaps I should. The key question should be: What separates the few that are long term successful from the majority who regularly lose?
My answer is that there are two types of players. Goldman Sachs legendary Gus Levy created the term ‘long-term greedy.’ Greed is defined as wanting more than you have. Nothing wrong with greed. It is neither good nor bad. There are those short term greedy and long-term greedy. Most take is that most players are short-term greedy. Short-term greedy types are solely interested in making as much money as possible right now and are likely willing to cut corners. Their mantra is, I want what I want, now!
Short-term greedy people almost always lose much more than they win, certainly over the longer term.
Long-term greedy means being a professional which includes doing your homework, keeping your word, cleaning up messes, honoring relationships with clients and employees. In other words doing the right thing for no reason all the time.
Over the years about one-third of the world’s largest hedge funds are or have been clients of mine. Of the top guys whom I know personally, I would say almost all are Long-Term Greedy.
The difference between short-term greedy and long-term greedy types undoubtedly was evidenced in the Feb 29 plunge in gold and silver prices. Gold and silver prices dropped sharply that day after Fed Chairman Bernanke did not say anything about additional quantitative easing in Congressional hearings.
The rumor is that some large bullion banks used the Bernanke non-QE mention as a cover to try and create a gold and silver bear market. Why would the big bullion holders want prices to drop? If indeed the drop was due to manipulation the obvious reason would be so the bullion banks would be able to buy gold at lower prices.
Meanwhile, in the face of a big down move in price, as what usually happens many short-term greedy types got scared and sold. On the other hand, most long-term greedy investors looked, listened and probably did nothing.
Whether or not the February leap day selloff was due to manipulation, the reasons to own gold and silver remain in tact. The US economy is still spending $100 billion a month more than it makes and all of Europe is also spending more than it takes in. Therefore, even without any announced QE both Gold (GLD) and Silver (SLV) are likely to go up faster than US and European equities. Long term greedy investors know that markets are volatile and can make wild swings and therefore invest appropriately.
President & CEO TrimTabs Investment Research
Portfolio Manager, TrimTabs Float Shrink ETF (TTFS)
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