There is an old saying that timing is everything. One of the dilemmas with our post bubble hypothesis is that while the enormous distortions affecting the market must eventually unwind, they can get bigger before reversing course. Balancing long-term with short-term views on the pivot of timing indicators is very tricky. For example, we think there is a housing bubble in the United States today, but we thought that two years ago too. (note: this was said in 2005). Since then, home-builder stocks have gone up by a factor of four, so it would have been a disastrous trade if we had put it on then. Lacking a good timing indicator until recently, we refrained from trading the housing bubble. Sometimes good trades are the ones you don’t put on.
