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If you don’t see anything, you don’t initiate a new position. You take risk only when you see an opportunity. Make it a habit to ask yourself for each trading or investing decision – do you have an edge or do you just hope to be right. Hope is not a strategy.

I will never forget Robert Wilson’s advice: If you have as much money as I’ve read you do in the paper, you are an asshole if you manage anybody’s money except your own. To go up 100%, you’ve got to be willing to go down 20%, and you can’t go down 20% with other people’s money

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.