Calling It Versus Nailing It

It’s one thing to call a trade, it’s another thing entirely to profit off that call. First, there’s the issue of timing. Then you have to be able to execute; when to get in, press your bet, take profits, etc.

The excerpt below is from Gregory Zuckerman’s The Greatest Trade Ever (emphasis mine).

Investment advisor Peter Schiff seemed in an ideal position to benefit from real estate troubles. For years, he had predicted that housing would stumble and that the financial system would implode. Schiff eventually was seen as something of a Cassandra of the markets, ridiculed unmercifully on business television networks. After one appearance in which Schiff issued his usual apocalyptic warnings, Neil Cavuto, an anchor on the Fox Business Network, asked Schiff if his next project would be an expose on Santa Claus. Commentator Ben Stein piled on, telling Schiff, You’re just wrong.

Schiff moved clients’ money out of stocks and shorted risky mortgages, as did Paulson. But Schiff picked the wrong investment to shift into, choosing foreign currencies, commodities, and emerging markets, among other things, all big losers in 2008. Some clients lost half their money that year, underscoring the fact that an awareness of an investment bubble is only valuable when you know how to profit from it. 

If you’ve already read The Big Short and want to brush up on the story before seeing the movie, I highly recommend checking out The Greatest Trade Ever.