The best way to become pro at finance is to make random calls. Yep. Here’s how it works: say the market is going up or down, and then simply wait for it to happen. The market can’t go up or down forever, so eventually you’ll be right.
This is the hazard of calling recessions. For every right recession call, there will be a wrong one. If you make a wrong recession call, everyone shrugs it off. If you make the right one, you instantly rise to the status of god.
Hence, how do we separate the people who make blind calls and get lucky and those who truly understand the complexities of the financial system?
The reality is, it’s really difficult to do so. We can turn to figureheads like Soros whose name is always there during a crisis, but even Soros misses out on most of his bets (he just makes extremely high return bets). And the odd incentive system is that making the right calls at the right time boosts your public image much more than wrong calls deduct from it. This creates a skewed incentive to keep on making big calls.
Who is god, and who is just lucky in the financial world? That’s why they say fund managers who consistently make 30% are much more valuable than fund managers who inconsistently perform.
To perform for the long-run, maybe a more sustainable strategy should be looked at. But to succeed at finance in the short-run, do a big all-in play and be ready to say “I told you so.”