The eternal crash on the stock exchange

I first published this article seven years ago on my old website, but the content of the article is still valid today. The eternal short seller and permabear still exist, of course, as do the crash prophets of yesteryear who predicted the end of the world (of the stock market). But none of it happened...  


Blog article from 2014:


Admittedly, times have not been easy for short sellers during the last 3 years. They were consistently overrun by the bulls and time and time again, when you thought the market couldn’t go any higher, the next all-time high came in the S&P 500 and the Dow. And even now (August 12, 2014), when we are experiencing "some" correction and some increased volatility, it is still uncertain if those paradise times (I mean paradise for me) will return. This is pretty typical for people who had their stock market apprenticeship in the early years after 9/11. Those were uncertain, volatile times when any permabull was eventually put out of business.

I first had to "learn" to buy the Dow Jones in weak phases and then earn profits. It was a different game than what I was used to (I like to scalp volatility in all kinds of markets). And my adjustment took too long. So, it was not a surprise that 2011-2014 were not my best stock market years, quite unlike 2008 or 2011, for example, when the markets went down drastically. That was my game.

The eternal short seller (and gold and silver bull) had to learn a new lesson in the stock market once again: adapt your strategies to market conditions. I had never experienced real bull markets like those of the late 1990s, where you just buy and sit on your hands. In theory, of course, I knew that could be done. But... knowing that it can be done doesn’t mean that it is easy to put it into practice. Somewhere in my brain sat a permabear (a permabear is always negative about the future direction of the markets and the economy in general, no matter what). He was never comfortable with the steady rise of the markets, and of course, if you have that tendency you can always find enough arguments to justify that attitude.  

The belief in the constant crash can be such a basic conviction that it is hard to get rid of. And it is also an expensive conviction. One look at the long-term charts is enough to see that. As is so often the case, such core beliefs are also ideologically based. I had to work hard on myself to scare away those perpetual gold bulls, Fed haters, inflation mongers and other conspiracy theorists that lived inside of me. All of that clouds your view of reality. And the reality was: the markets were going up!

If things start looking different when smaller corrections happen, and some crash prophet begins to shine, don’t forget that large market turns don’t really take place that fast. Let’s wait and see if a major correction comes at some point. If it does, I will be among the short sellers, as any trader should be. And this time, I swear, my adjustment will happen faster!

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