Do you use your guru report as a measure of contrary opinion?
I try not to be too much of a wise guy because during major price moves, they will be right for a portion of it.
What I am really looking for is a consensus that the market is not confirming. I like to know that there are a lot of
people who are going to be wrong.
So if you see that most of the members on your guru list are bullish at a time when the market is
not moving up, and you have some fundamental reason to be bearish, you will feel stronger about the
trade?
Yes, much stronger.
Do you think people can trade profitably by just following the gurus?
Probably, but my impression is that to make money, you have to hold a position with conviction. That is very
difficult when you are following someone else. There are
some good gurus, however. For example, in the stock
market, I like Marty Zweig. He uses excellent risk control. Unlike some other gurus, he doesn't believe he is predicting
the future; he is simply observing what is happening and making rational bets.
You talk about both the importance of risk control and the necessity of having the conviction to
hold a position. How much risk do you typically take on a trade?
First of all, I try very hard not to risk more than 1 percent of my portfolio on any single trade. Second, I study
the correlation of my trades to reduce my exposure. We do a daily computer analysis to see how correlated our
positions are. Through bitter experience, I have learned that a mistake in position correlation is the root of some of
the most serious problems in trading. If you have eight highly correlated positions, then you are really trading one
position that is eight times as large.
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