Manchester United are about to be bought by Qatar.


Well, it's not exactly a fact, but all signs are pointing to this happening.

The one in the main for me at the moment is the rapidly increasing share price with just no let up.

This does not happen if the market is not tilted towards wanting a certain outcome to occur, which in this case is the Qatari Sheikh Jassim going for 100% ownership of the club, vs British 'billionaire' (in quotes because his offer is not of billionaire status) Sir Jim Ratcliffe structuring a deal to only buy out the current owners' shares.

Anyway, it's by the by...

I'm in a Manchester United group chat, and trying to explain how the market works to your everyday person is a tricky thing to do.

What happened in short?

Well, I was arguing that the share price increase over the barrage of rumours over the last few weeks that point to Qatar having won the bid over Ratcliffe are nothing to be ignorant over.

Their argument was that it is all speculation and that markets work based on gambling, the current rumours and anticipation.

This is a perfectly fine view to have, but from an investing standpoint it will only lead to poor outcomes and bad risk to reward and almost verges on a belief in the efficient market hypothesis, which is that the market knows all information that is available right now...

But the problem with it in this context is that the current takeover deal is all behind closed doors, as most are.

How then are mere rumours pricing in such a consistent increase in the share price?

But more importantly, if you were to invest in the market, are you simply going to wait for confirmation to buy?

In my view, no. But this tends to be how normies get caught out.

They are too Christian about things (confirmation is for Christians), rather than being more chaotic; more probabilistic.

And I think this is the problem with how many view markets - they require certainty and cannot give up the feeling that a share price is unable to indicate a direction of travel until a certain event occurs.

Think about FOMC as an example...

You tend to get the movement based on expectations WELL before the actual event, right?

So then how would you be able to invest adequately if your belief were that you could only confirm a view (to make money) when it is actually actioned?

The way that should be thought of things is...

What is the likelihood that this view will come to fruition and how much more shall I bet as information comes to light confirming my view?

The inability to do this is what results in top buying.

'Oh look, Apple released a new product, let's buy Apple because that's surely going to lead to a price increase!'

No mate.

Whenever Apple releases a new product, the price tanks because all the buying has been done beforehand.

Literally buy the rumour, sell the news.

All of this feeds back into the article I wrote earlier this week on sentiment.

💵 What does posting a satirical Tweet tell us about the state of crypto?
After the trouncing of altcoins late on Friday night, I decided to do a little sentiment digging by posting the below Tweet, which probably most have seen by now…
I’ll tell you a secret... make the subjective, objective
Yesterday’s article had mentioned a paper on hedgefunds going against media (and therefore public and uninformed traders’) sentiment.Have a read of the PDF if you missed it…

You want to be fading weak opinion like this.

Any insight from uninformed participants is fadeable opinions.

People post screenshots of their entries and exits without realising how much information that gives away about them - not their strategy necessarily, but them as part of a broader collective that can end up being aggregated to form a view on your own actionable use case.

So the way you by the top of the market is...

1) Don't have a probablistic view.

2) Wait for all the bits of information to come together first.

3) Get excitable.

And there you have it.

The perfect way to lose money.