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The best advice I've heard about trading is poker advice.

"There's a sucker at every table. If you can't spot him, it's you."

Cycles like the one we're going through really illustrate this. Look at all the suckers who bought 2nd homes in Stockton as an "investment." If you realized this, you bet against that trend, and made money.

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The sad truth is that there's often a lot of suckers at the table. Spotting the sucker doesn't mean you're not one.

True, but identifying the other sucker means that you know why the other guy is a sucker. If you can constrain your betting to betting against suckers, into their weak spot, its hard not to win. The hard part is being patient enough to avoid competing with the unknowns at the table.

But if your bet was placed as a CDS with Lehman, you actually may not have made money.

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