A Venture Investor Channels the Noise

As an investor, I need to feel the pulse every day, and wade through the drivel in order to pan the gold. The pulse has to reverberate in my veins, but only so I understand what the market is saying today. Then I have to resist the calming effect of that thub-dub of conventional thinking and venture out into the noise, out on the edge, to find new information, what’s next, which can lead to knowledge. It’s as elusive as humpback whales but it’s there.

With a beta of 1.0, any sample of the market exactly recapitulates the market averages. It’s the insight extracted from the information, that alpha, which separates the winners from the snoozers on Wall Street.  Indexing is a waste heap – all info so merged and muffled that it hides knowledge rather than reveals it. All beta, no alpha.

So what do the best modern money managers do?  They live for the pulse, in the pulse, but then work out, often by an educated gut, what is different, what is going to change –where the surprises will come – where Shannon hid the entropy. That’s valuable knowledge. No more leisure suit Nifty Fifty, no more indexing, no more day traders, no momentum investing, no more fooling around.

via A Venture Investor from Bell Labs Channels the Noise and the Knowledge | Thoughts from the Frontline Investment Newsletter | Mauldin Economics.  Andy Kessler

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