- A gap exists between perception and reality
- The theory of reflexivity
herd mentality dictates that the market driven by momentum will eventually over extend itself.
- the herd will eventually realize its over extension and revert to mean
- however momentum will once again do its work and result in over extension in the opposite direction
- at times you will need to be somewhat schizophrenic by keeping in mind two equally plausible but conflicting mental models and predictions while doing your trade.
- What matters most is your gain when you are right and your losses when you are wrong
When you know you are right, go for the jugular
- it is the correct but non-obvious trades that generate the most outsized returns
- A country with poor fundamentals, high level debts and limited foreign reserves will have limited ability in propping up its foreigns reserves much as it attempts to do so
- maintaining a wide network spread across multiple territories will help in forming a better informed mental picture on the state of things