During the podcast of "winning the great game", Adam Robinson share his thought about Medal Traders disagree with Bond traders and Medal Traders will always trump.
Medal Trader Idea = Copper Future / Gold Future
when up, means Medal Trader has a good expectation of the future economy
More on Adam’s Approach to Investing
Stock Traders vs. Bond Traders vs. Currency Traders vs. Metal Traders vs. Energy Traders
Each of these people is expressing a view of the future through their investments
A stock trader who’s bullish on the economy (thinks it will improve) will buy stocks
A bond trader who’s bullish on the economy will buy corporate bonds and sell treasuries as a hedge (just in case the interest rates rise – causing the bonds to go down in value)
A metal trader who’s bullish on the economy, will buy industrial metals (copper, iron), but will simultaneously sell precious metals (gold, silver, platinum – who needs these if the economy is doing well?)
If stock traders and bond traders differ in their views (say the stock trader is buying up stocks because they think the economy will do well, and the bond traders are more pessimistic – they start selling corporate bonds and buying treasuries)…
“19 times out of 20, when those two groups disagree, the bond traders are right, and early”
“When I say 19 times out of 20, I really mean 99 times out of 100”
“If you want to find out when a stock will be in trouble, follow the corporate bonds of that company relative to US treasuries”
The ETFs for that – LQD and IEF
LQD is the corporate bond ETF
IEF is US treasury 10 year ETF
So just take a ratio of LQD/IEF – this will tell you what bond traders think of the economy. When they disagree seriously with equity/stock traders, the bond traders are right, and early.
“When the equity traders and currency traders disagree about the direction of currencies, the equity traders will be right on the currencies 3 times out of 4”
The Metal Traders
Adam calls them the most far sighted and accurate group of traders
They have a simplistic view of the world (their model is simplistic)
If people are buying copper – all is good
They’re in touch with the world economy (metal is something tangible)
They’re very far sighted – if you want get iron out of the earth, you need to plan far in advance
Adam’s Hall of Fame Ranking of Traders
1/ Metal Traders
“Metal traders have not been wrong once, in the last 18 years, in regards to the direction of interest rates”
2/ Bond Traders
3/ Equity Traders
4/ Oil traders
5/ Currency Traders
6/ Economists
“Economists are literally always wrong. If you have a group of economists, and they’re in 100% consensus about the direction of interest rates, I’m going to take the other side of the trade, for sure.”
7/ Central Bankers – “They’re not in touch with the economy at all”
Stock Traders vs. Bond Traders vs. Currency Traders vs. Metal Traders vs. Energy Traders
Each of these people is expressing a view of the future through their investments
A stock trader who’s bullish on the economy (thinks it will improve) will buy stocks
A bond trader who’s bullish on the economy will buy corporate bonds and sell treasuries as a hedge (just in case the interest rates rise – causing the bonds to go down in value)
A metal trader who’s bullish on the economy, will buy industrial metals (copper, iron), but will simultaneously sell precious metals (gold, silver, platinum – who needs these if the economy is doing well?)
If stock traders and bond traders differ in their views (say the stock trader is buying up stocks because they think the economy will do well, and the bond traders are more pessimistic – they start selling corporate bonds and buying treasuries)…
“19 times out of 20, when those two groups disagree, the bond traders are right, and early”
“When I say 19 times out of 20, I really mean 99 times out of 100”
“If you want to find out when a stock will be in trouble, follow the corporate bonds of that company relative to US treasuries”
The ETFs for that – LQD and IEF
LQD is the corporate bond ETF
IEF is US treasury 10 year ETF
So just take a ratio of LQD/IEF – this will tell you what bond traders think of the economy. When they disagree seriously with equity/stock traders, the bond traders are right, and early.
“When the equity traders and currency traders disagree about the direction of currencies, the equity traders will be right on the currencies 3 times out of 4”
The Metal Traders
Adam calls them the most far sighted and accurate group of traders
They have a simplistic view of the world (their model is simplistic)
If people are buying copper – all is good
They’re in touch with the world economy (metal is something tangible)
They’re very far sighted – if you want get iron out of the earth, you need to plan far in advance
Adam’s Hall of Fame Ranking of Traders
1/ Metal Traders
“Metal traders have not been wrong once, in the last 18 years, in regards to the direction of interest rates”
2/ Bond Traders
3/ Equity Traders
4/ Oil traders
5/ Currency Traders
6/ Economists
“Economists are literally always wrong. If you have a group of economists, and they’re in 100% consensus about the direction of interest rates, I’m going to take the other side of the trade, for sure.”
7/ Central Bankers – “They’re not in touch with the economy at all”