In 2006, the housing bubble was still on the upswing. Interest rates were at all time lows and banks offered NINJA (no income no job applications) to borrowers to get them into a house, no questions asked.
The 124 financial regulatory agencies (I’m sure just one more would have prevented it!) and the talking heads on the major networks were oblivious to the issues, if not encouraging more.
Peter Schiff saw through the charade and knew this was all going to end and it was going to end badly.
He was the lone voice on all of the major networks to come on and warn viewers about where this was all headed. He sounded the alarm again and again and again. In the run up to the crash, he was mocked and laughed at on air for his views.
The Air Comes out of the Bubble
In 2007, the market began to decline after hitting a new all-time high. The slide lasted about 18 months, all the way until March 2009 where it finally bottomed out.
Schiff, and the few others who saw it coming (definitely not these guys) made a killing.
Since then, the market has rebounded dramatically on the back of Fed stimulus.
Schiff and others see the Fed recreating the 2008 financial crisis but at a much grander scale. The calls for a crash have been incessant for over a decade now.
One day, he’ll be right.
Until then, followers have been advised to buy and hold foreign stocks, gold, and gold miners.
How have they performed?
Well, if you followed that advice just about any time after 2009*, you might not be too pleased:
*2009 was about the bottom of the bear market in stocks, but it was also the bottom in everything else. The biggest benefits would have come from being in gold prior to the crash because it actually increased in value from 2008-2009, even though it gave some of the 2008 gains back.
Moreover, Schiff remains adamantly against Bitcoin despite watching it rise for years on end (we’re not even going to bother with that chart vs his recommendations).
Don't Time the Market, Ride the Market
Schiff may be right in the end, but he (and those who follow him) have missed out on monumental gains in the meantime. Over a decade of compounding has been passed up on because of a bearish fundamental view.
Watching the struggles and missed predictions of smart guys like Schiff over the years is part of what pushed me into the algorithmic camp.
Markets are too hard to predict.
A correct thesis may take years to play out - and you may miss out on life changing performance in the meantime.
To do well in this game you have to get the fundamentals right and the timing. That’s an impossible combination.
So let’s play a different game.
By following well-developed trend following strategies, you can let an algorithm manage this for you.
It can control your risk and trade a vast number of diversified instruments on your behalf.
This doesn’t mean this is easy to do (if you want a quick and easy way to wealth, there are plenty of “gurus” out there offering that) but it is doable.
I don’t care if US markets are going to the moon. Or if UK markets are, or Japanese, or gold or whatever.
My system can jump on the price signals and ride it all the way up. No need to tie myself to an ideological mast while watching tempting markets pass me by.
Get in when the signal says. Manage your risk. And get out when the signal reverses.
In 10-15 years, nobody is going to look back at how smart we were for calling a big crash. But we don’t care.
We’d rather be rich than be right.
Raposa provides the tools for you to develop your own algorithmic trading bot. Join us in this crazy adventure as we prepare to launch our new platform for a limited number of users. No code, no problem.