My Big Fat Mean Reversion Wedding

Corona Del Mar, CA

Howdy Friend!

Just as "support" started breaking...what did the markets do? Go straight up.

This is typical behavior.

In the 1950's and 60's markets would trend better. Bonehead-simple strategies like "buy after a breakout" would work because everything was going up.

With the introduction of index futures in the 80's, stocks began to mean revert.

Here's what that looks like:

This sort of manic behavior is something you should LOVE LOVE LOVE!

It's why our strategies make so much money.

Once you understand that, you're going to get on one knee and propose that the markets continue doing this from here until the cows come home.

In order to have extraordinary profits, you need to have extraordinary ideas on how to beat the markets.

Nothing you do should ever be spoken about on CNBC or in the Wall Street Journal.

That also means you can't let any ordinary trading ideas into your head.

Last month, I was talking to Josh, and he was a bit worried about taking a draw down. I reminded him that markets mean revert -- as do strategies.

Sure enough, he's having a great month. Here's his audited return at Fundseeder:

I was joking around with one of my 1on1 clients how markets are like my crazy Uncle Randy -- one minute that guy is talking about the end of the world...next minute he's excited that his moonshine cured his gout.

I'll leave you with one final comment. I want you to visualize every chart like the last price is attached to a teeter totter. Burn it into your skull. Enjoy your weekend.

P.S. Here's why all the old books are basically useless. At one time, stocks and indices would trend much more than they do now. You can see how buying a new 20-day low and selling a 5-day high was a losing proposition. That all changed with the introduction of index futures in 1982. 

Since then, stocks have been oscillating up and down much than in the past. Due to the fact most people don't ever run computer models like this, the vast majority of traders still haven't caught on that price movements changed 42 years ago.