5 from 5i: Lessons from the World Cup

Barkha Rani Jul 20, 2018

Market View

U.S./China trade war seems to be on a roller-coaster ride with the latest developments including President Donald Trump threatening to slap tariffs on all $500 billion of goods imported from China. On the other side, Trump commented on not being happy with the Fed increasing rates, but also said that he would “let them do what they feel is best”. Retail sales rose 2.0% in May following a 0.9% decline in April as eight of eleven sub-sectors saw their sales rising. The Canadian dollar was 76.11 cents U.S. The week ended with the TSX down 0.6% and S&P 500 flat.

A poor week overall for the TSX subgroups. Six of the subgroups performed negatively, with healthcare falling the most by 10%, followed by energy, 2.6%, materials, 1.9%, and consumer staples 1.1%. Industrials and technology rose 0.4% and 0.6% respectively, while the others ended flat. On Tuesday, Aphira was down 4.2%, after it announced plans to buy Latin American and Caribbean assets from U.S.-based Scythian. The most heavily traded shares by volume were Aurora Cannabis, Bombardier Inc., and Canopy Growth.

5 from 5i

-What does the flattening yield curve mean?

-Valuation: Earnings growth expectations

-Lessons from the World Cup? (Portfolio returns)

-Is Goldman Sachs recreating 2008?

-The macro data actually lines up nicely in the current environment.

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j
john
Jul 22, 2018
The soccor goalie analogy is interesting (I had come across it before), but I think it misses the mark.
The goalie dives left or right because that has been the conventional wisdom for a very long time. It would require tremendous courage for a goalie to just stand still, because if it turned out badly he would be exposed to tremendous criticism from the press and fans. This is why players and coaches sometimes employ suboptimal strategies. They know everyone is watching and don’t want to risk criticism. So they choose conventional strategies, even when they might know they are not the best chance at success. Football coaches routinely punt on fourth down even when trailing by a wide margin late in games. They do so to avoid the embarassment of a big loss, rather than gamble and try fo rthe win. They turn a probable loss into a certain one, to save face.
Overtrading is different though. Most people see the market as zero-sum. They feel they have to “outsmart” the market. That is what leads to bottom-fishing and selling winners early. Traders feel that if they don’t out-trade others in the market, they won’t beat the index. It is a minority (perhaps) that simply wish to participate in the businesses that the exchange offers us.