The Inversion Investor

The Inversion Investor

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The Inversion Investor
The Inversion Investor
Trade 5 - Win Rate 90%: White Screens,Blank Stares & Slow Motion
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Trade 5 - Win Rate 90%: White Screens,Blank Stares & Slow Motion

Peter Pham's avatar
Peter Pham
Sep 04, 2024
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The Inversion Investor
The Inversion Investor
Trade 5 - Win Rate 90%: White Screens,Blank Stares & Slow Motion
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What is the purpose of the analyst?

He sits there, picking and choosing catalysts that can only explain 30% of a year-over-year market move. Yet, we as a society praise him as great. He touts that it’s his ideas that prove, unequivocally, that market efficiency has been debunked by his existence.

Then yesterday, NVDA plops on the market, and his semi-correlated idea goes with it.

Then it’s spreadsheets, CRM’s and blank stares as his clients call him and ask, “What’s up?” He says, “It’s the DOJ” or blames Mr Market?

Some days it’s Mr. Market, and other days it’s Mrs. Market. More buyers than sellers, and they all chuckle at pseudo-causality in the morning meeting, in a self-congratulatory manner. Or like the investment banker who acts as if the VIX is beneath them, when life and risk are synonymous with each other.

The hubris is in thinking that efficiency and inefficiency are 100% binary. But they’re not—it’s cyclical.

Perhaps it’s more of an adaptive market?

I’m not even pleased with a 60% chance, plus the time value of money, to discover if you’re on the right side or not with a 60% probability. Most are giving you something equivalent, with more blind spots than they care to admit.

Consider the gold bug pounding the table, telling you he called it. What exactly did he call? $2,500 over how many thousands of years? Or did he call the economic cycle timing in which metals peak?

Or consider this: if one could game earnings four times a year to explain, say, 40 days of market moves for a stock or the overall market, which has over 200 trading sessions, what does that imply about the remaining days? Should we ignore Mr. Market because, over the long term, there is a random positive market drift?

One day it’s an EPS beat, another day it’s a concern over margins, then it’s CAPEX, followed by Taiwan, and then the Middle East?

This is why, if markets are based on probabilities, one focus on identifying the highest ones.

Here is trade 5 with a 90% win rate.

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