As humans, we are programmed to assume our solutions will work. It is an important evolutionary trait. The military solution to this optimism bias is to assert deductive reasoning and the arrangement of a reserve capacity, to compensate when systems fail, resources run out, or solutions are exhausted…..
Comment: The equivalent for investors, to maintaining a reserve capacity, is position-sizing: never bet so much on any one trade that an adverse outcome, or string of adverse outcomes, would affect your ability to keep investing/trading.
Colin Twiggs is a former investment banker with almost 40 years of experience in financial markets. He founded PVT Capital (AFSL number 546090), which provides income and growth strategies to wholesale clients.
Colin also co-founded Incredible Charts and writes the popular Patient Investor newsletter.
Using a top-down approach, Colin identifies macro trends in the global economy and then combines fundamental and technical analysis to evaluate opportunities in sectors that stand to benefit.
Focusing on interest rates and financial market liquidity as primary drivers of the economic cycle, he warned of the 2008/2009 and 2020 bear markets well ahead of actual events.