As you will recall, a pair trade is a trade that goes lengthy 1 aspect and quick the other with the notion of capturing the distinction in functionality. Another way to frame my existing favourite pair trade is “Wisdom” vs “Emotion”.
It is my speculation that a species’ evolutionarily productive emotional responses are codified in DNA as instincts. We also know that markets punish herd actions, given that the herd can be spooked, and therefore reliable to overreact in moments of peak agitation. This is why I like to measure volatility and describe it with figures in such a way as it is each secure enough for continuity and but adaptive adequate to respond to alter in accord with deeper tendencies which are evolving underneath the surface area of immediate observation
In this pair trade Buffett plays the part of knowledge, the protoypical clever uncle who has seen it all, and is aware how to frame the issue and navigate via uncertainty. The latest, best ETF, the metaphorically exuberant youth in look for of riches in the land of milk and honey, is represented by EEM (the emerging markets.
There is a time for each in human existence cycle, in the passing of seasons, in the biking of marketplaces. Would Study Positive Psychology say that the exuberance of youth must be minimize out of our life and knowledge? the place would the ventures appear from? the entrepreneurship? knowledge is not every thing, but it also has its time and spot.
Just as we can increase and experienced our judgement, so to can we carry diverse values and insights to bear as the market morphs all around us.
This is plainly Buffett time, nevertheless you slice it.