Trading is a zero-sum game. Traders must trade with people who will lose to become profitable. Profit-driven traders therefore must understand why losers trade to know when they should trade.
Profit-driven traders trade only because they rationally expect to profit from their trades, including speculators and dealers. Utilitarian traders trade because they can obtain some benefit from trading besides trading profits. Investors move money from current to future. Borrowers move money from future to current. Asset exchangers need to exchange assets. Hedgers want to lower the risk. And gamblers trade for the joy of trading. The profit-driven traders are rational, and they theoretically profit from providing the utility to the utilitarian traders. Identifying a general utility need is very helpful to identify opportunities. In the 2008 crisis, banks deleverage and few people have cash. It is the perfect time for Berkshire to make strategic deals as they are flushed with cash. In this sense, it is good to be different.
No comments:
Post a Comment