Fathoming the unfathomable by definition seems unfathomable, so most folks don’t try. However, like Question One, it doesn’t require any additional scholarship, genetic superiority or magical superhero powers. All you need is Question Two: What can I see that others can’t? The more you ask, the more you can see. Since the only basis for a market bet is knowing something others don’t, this question can provide the second basis for a bet. Go ahead and ask yourself: What do I know that others don’t? At this point, your answer may be, “Well . . . nothing.” It’s most people’s immediate reaction.
Don’t be discouraged. You won’t be bombarded with Question Twos like you are with Question Ones. We get bombarded with investing nonsense daily. Discovering something others don’t know isn’t a “Eureka!” moment. It’s not the apple falling on Newton’s head. It’s what happened afterward when Newton asked, “I wonder what the heck made that happen?” and contemplated what forces, natural or sinister, could be at play. It’s the reflection in a quiet room away from the incessant market and media noise when you wonder if factor Q could possibly cause result Y when everyone else is yammering on about X causing Y.
The world is busy insisting high P/Es cause poor stock prices (wrong—usually), debt is bad for stocks (wrong), you shouldn’t fight the Fed (wrong about half) and high trade deficits cause a weak dollar (wrong, wrong, wrong). But to know something others don’t, you tune out the noise and wonder—if everything everyone insists moves currencies doesn’t, I wonder what actually does? (We go there in Chapter 7.) And if I shouldn’t fight the Fed, is it possible the yield curve can tell me anything at all about stocks? Or must I just look at it differently somehow? I wonder? Wondering is wonderful.
Wondering Is Wonderful
Suppose no one has a clue what causes result Y. If everyone knows no one knows what causes Y, then probably almost no one is willing to think about what causes Y because they will believe it a waste of time. In our contemporary world, in America and more so elsewhere, if something is seen as unfathomable, normal people will treat it as a complete untouchable. These areas are especially ripe for inquiry because they are so virginal.
Misapplication of Question Two can lead you to waste time plowing through common media sources for clues. Through the miracle of mass production and electronics, pretty much all media is everywhere and all around us—constantly. Your investment edge won’t present itself in a ready-to-use format in a front-page news story in any publication or in an evening news program or blog or e-mail newsletter. No matter how buried a news item or how insignificant a blog, we live in a fast-moving world. Your “news” edge almost certainly will be snatched from you before you’ve found it.
Don’t despair; you can still use all that widespread noise to help you find something no one else knows. All it requires is fighting eons of behavioral conditioning. Here’s how.