No matter how 2013 unfolds, I promise you that nothing will be as dramatic, contrarian, or profitable as getting long natural gas and shorting Groupon was in 2012. Sorry, folks! While I don’t think that epic trade was entirely due to luck, I do think that the tremendous extent to which it worked out was totally lucky.
You guys know how I’m always preaching “never mistake luck for skill” and that goes double when it comes to making predictions. The last thing I want is for you to ascribe me with powers I simply do not possess.
The other thing I’m always preaching is that if you’re taking someone’s predictions seriously, you’re doing it wrong. Predicting the future is impossible. It’s an exercise in futility. I don’t judge myself by the number of these things that come true nor should you. The point of all this is to raise interesting questions about the year ahead and to try and look at things through a slightly different lens. As an investor, being able to do that is a valuable exercise.
I also do it because it’s fun and I like to poke fun at myself. Plus, nothing builds character like getting up in front of thousands of people and failing.
You should try it sometime!
One of the things that worked out for me last year was the process I used. I sought first to identify a high-probability macro-economic backdrop. Within that, I then looked at specific areas where the consensus views didn’t quite add up or had higher probabilities of deviating from the consensus forecast.
So what are we highly likely to see in 2013? What should our backdrop be?
We’re going to do this in two parts, first the secular backdrop and then the cyclical backdrop. Then we’ll figure out where consensus is, identify exactly where it’s weakest, and use its own energy push back against it and throw it to the floor.
I like to call it Speculative Judo.
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