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Comment by hnthrow0287345 | Hacker News Reader

People have cried wolf or been wrong about incoming crashes and bubble pops so many times that this signal -- whether it's a good signal or not -- simply won't change anything I do.

I'm sure someone somewhere could make a trade off of this article and this signal is definitely for them.

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It is incredibly hard to make money going short. Even if you are right about the direction, most short positions require interest payments to hold, or have some sort of decay built into the structure. So timing is everything and even then, if the underlying security slowly grinds down (instead of a quick abrupt move) you could still lose if the interest/decay on the short position outruns the downward movement on the underlying.

I have been actively trading in the market for a little over a year now, and while winning on a short position is probably the most satisfying trade for me, the overwhelming majority of those trades are losses and at this point I mostly treat them as hedges. I suspect that is true for most market participants as well.

There's actually (at least) three things going against you going short:

- position has significant negative carry (what you're talking about there)

- stock/bond prices are nominal and the government constantly prints the denominator so prices tend to go up even if there's no actual growth

- for equities there is a genuine long term positive drift over time even if the denominator doesn't change

So yes, it's hard to make money going short and timing is everything

Even if this was a reliable signal for most of us it shouldn't change anyway. Timing the market is hard, so if you have a job keep investing in your retirement accounts and let dollar cost averaging work it out - odds are you are buying at fire sale prices. If you are one of those who lose your job - it doesn't matter much if the economy is good or bad, you need to adjust a lot of things (even in the best of times sometimes by chance you can be out of work for a long time)

If you are the manager of a mutual fund you can take useful action on signals like this if you can figure out what they mean. Most people don't have enough money to be worth trying to take action.

You may not be able to properly let dollar cost averaging do its thing if you rely on your job to invest, since there's a high correlation between periods where people are out of work and periods where asset prices are lower.

Even in the worst part of the great depression 75% of the people had a job. Most years where much better.

Don't get me wrong, if you don't have a job things are bad. If you have a job but it isn't giving good raises, or it is a worse job than you are qualified for things are bad. However things are not hopeless for the majority of people even when things are really bad, and you can get through it.

"Signals" are rubbish. The market is irrational and will change its mind at random.

This is, however, one of many indicators of an overall wobbling system. It would be a good time, not make the line go up, but to look for ways to stabilize the economy as a whole.

Which is unfortunately a hard question. One could theorize that we should do different things than the thing we've been doing for the past year or so, but of course there will be many who say that we just haven't done it hard enough yet.

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