As you will remember, a pair trade is a trade that goes long 1 aspect and short the other with the notion of capturing the variation in overall performance. Yet another way to body my present favored pair trade is “Knowledge” vs “Emotion”.
It is my speculation that a species’ evolutionarily productive emotional responses are codified in DNA as instincts. We also know that markets punish herd habits, since the herd can be spooked, and therefore trustworthy to overreact in moments of peak agitation. This is why I like to measure volatility and describe it with stats in this kind of a way as it is equally secure enough for continuity and nevertheless adaptive sufficient to react to change in accord with further traits which are evolving underneath the area of immediate observation
In this pair trade Buffett performs the function of wisdom, the protoypical smart uncle who has observed it all, and is aware how to frame the difficulty and navigate by way of uncertainty. The most current, hottest ETF, the metaphorically exuberant youth in search of riches in the land of milk and honey, is represented by EEM (the rising markets.
There is a time for each in human lifestyle cycle, in the passing of seasons, in the cycling of marketplaces. Would we really say that the exuberance of youth need to be minimize out of our existence and knowledge? exactly where would the ventures appear from? the entrepreneurship? knowledge is not every little thing, but it also has its time and location.
Just as tu van tam ly can develop and experienced our judgement, so to can we bring distinct values and insights to bear as the marketplace morphs about us.
This is plainly Buffett time, however you slice it.