Opportunity cost of a Fundamental-only strategy

From the Economist:

“The ups and downs in the prices of industrial metals since the beginning of 2008 have reflected the fluctuating fortunes of the world economy. The copper price, which peaked in April 2008, had fallen by over two-thirds from that high by December 30th last year, when it hit bottom. The price of nickel fell by a whopping 72.3% from peak to trough. Prices have recovered as growth has returned to most rich countries. Copper is now selling for more than it did at the beginning of last year. The price of zinc has doubled from its low point last December, though it is still 2.9% cheaper than it was at the start of 2008. The nickel price has risen by nearly two-thirds in the year to November 24th.”

Read it again with the italics (which are of course mine). It occurs to me that as a trend-follower, many of the words in the English lexicon are no longer useful: in fact, their usage instills bias.

How much did you lose out on making if you bought and held any of these metals? Assume 10% margin rates. You can get a pretty good idea.

Volatility is not something to be shaken from. Use smaller positions or options, but don’t miss out on big moves up or down. You’re leaving too many opportunities transpire without earning your rightful share.


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