0 Correlation Investing —-
Warning: Today you are going to realize something that may leave you deeply troubled.
What you are about to discover will mean that the huge debt you paid off for your college education and all those commissions you paid to your financial advisors was money spent based on a theory of investing that has been proven completely false!
A total lie.
We were told from a young age, that as we accrue wealth and invest, that we should follow a diversified portfolio approach to asset allocation. Fancy words but, in simple terms, this means spreading out your investments into areas like bonds, large and small cap stocks, international markets, real estate, forex and commodities. The idea is based on having money in low or unrelated investments so that if, for example, your real estate holdings dip, then another area of your portfolio will be relatively unaffected.
Or in more simple terms; If something goes upside down in your life, another part of your life will be right side up, because you put your money in different places.
Your advisor might have even gone so far as to explain that some of those investments have a negative (opposite) correlation, so that as one investment loses the other gains (such as stocks and bonds).
This is a critical point to understand, because many of us still follow this idea, even though we are sure it is NOT true. This is so ingrained in us that we are, somehow, still under the belief that our investments are lower risk than they really are. It’s astounding, actually, that we still blindly follow that advice.
Because at some point, reality will rear its ugly head and prove once again that it is, in fact, all connected. While we can all agree that the system is rigged against us, I have great news for anyone this letter was shared with. I figured out THE way to beat the system.
First, let me share with you a personal story that is not something I am overly proud of.
In fact, it’s actually the most embarrassing moment of my life.
In the 2008 market crash we were reminded that all these markets, and the markets within the markets, are in fact correlated and, like many people, I got caught in the middle of it.
A few years prior to the crash I was a new investor learning the ropes and actually dominating the game. The economy was strong and property was red hot. Everything I touched turned to gold and I was in the midst of the most amazing financial run of my life.
I was killing it at my job.
My portfolio was looking juicy.
I had invested in more property than I thought I would ever own in a lifetime.
My girlfriend was hot enough to melt butter and my black Porsche was brand new off the showroom floor. The guy who waxed it for me was nicknamed “Buffy” and I used to tip him $100 if I could see my face in it when he was done.
Life was good.
I honestly thought I could do no wrong and the smartest thing I thought I did was follow the age old “diversify your portfolio” adage to the tee.
But then it all fell apart…
Nothing could stop the 2008 crash from connecting everything I owned together. My portfolio became worthless, my properties ended up worth so little that they actually COST me mid-6 figures to get out of them.
Oh and that smoking hot girlfriend?
She left me after I told her I had to sell the Porsche.
Even Love is correlated to the markets!
Remember what I told you earlier? All these markets, and the markets within the markets, are in fact correlated. And in some instances that inverse correlation reverses and becomes directly correlated.
There are several in-depth, headache-inducing, research reports about the change in market correlation during times of volatility/crisis. Here is one of the better ones:https://www.researchgate.net/publication/48202792_Correlation_of_financial_markets_in_times_of_crisis
The point the report makes is that when there is a crisis, when your investments are really “exposed”, that diversification you thought your portfolio had disappears like a fart in the wind.
Let’s take a technical look into the 2008 crash to prove this point.
(INSERT comparison chart of markets during the crash)
Now, while I took my losses like a man, I also promised myself that I would do as much as I could to never feel that sting again.
Fool me once, shame on me. Fool me twice? I don’t think so.
I would create that wealth again and this time my car would be faster and my girlfriend would be even hotter (more about her later). So I decided to dedicate every available free moment to researching and looking for real “Zero Correlation Markets’ and finding out how I could leverage them in the future.
What I learned changed my life forever.
The first thing I had to do was throw conventional thinking out the window. Then, I needed to ask the question; what is it I am actually doing to determine my choices in stocks, bonds and other investments?
Warren Buffet is NOT my uncle. Is Donald Trump didn’t marry my cousin. Or am I investing based on data…fundamental and technical information that leads me to a conclusion about which side to take and which market to invest in? Of course I am. I spend hours upon hours trying to find the trends and countertrends, and the fundamental indicators to tell me when to buy or sell.
I realized that, through all this research, we decide where to wager our money based on the data we have and the paths we see. And then I realized if that is the case then it doesn’t matter if I am trading widgets, moon dust or Apple stock – I am simply doing market analysis and making an educated decision based on that information.
That is when I started to see it all for what it truly was and I realized the path that I had to go down. My goal was to find a market that could truly achieve 0 correlation to any other market. A market where I could still apply the same strategic approaches and logic to my investing. For years I tested countless theories based on these principles and finally landed on someplace that will probably knock you out of your chair – sports.
Yes, sports. I know, your mind was just blown and so was mine, but read on and trust me; learning what I did is worth your time.
Sports hits all the marks – frequent trading opportunity, market data and analytics through the wazoo, liquidity, and now legality and access like never before. But the best part…and this is the part I really love…is that the winner of the Mets vs Dodgers game is not determined by Trump’s dealings with China, the Fed’s next rate cut or Apple’s latest earnings announcement.
Sports simply doesn’t care whether the economy crashes, the US goes to war over camera phones or the President goes through a 4 month impeachment hearing.
NOTHING external affects these markets and the data that I now have access to.
This is true 0 correlation.
The best part is that by applying analytics, systems and trading approaches to sports, I leverage the same logic you apply to your stocks, futures or crypto trading, but to a completely uncorrelated market. This has given me a new way to diversify my portfolio that makes me whopping gains and helps me sleep a lot better at night. Now I control my own destiny.
I call it sports trading, because approach it the way I approach my stock and futures trading, so it is no more ‘gambling’ than any of these other markets you and I trade. Sports Trading lets me use the historical patterns and trade the likelihood of that pattern continuing.
So how did it all work out for me?
With success came growth and I even went so far as to hire a team that helped me source what I need for my system, ZERO ONE™, that helps me see these patterns sometimes weeks in advance. Any pattern that does not meet ZERO ONES’s back-tested criteria is tossed and the ones that do, go into my portfolio. With ZERO ONE, for example, I can identify a pattern that has made money 78 out of the last 100 times the pattern has appeared. I then apply my money management approach to the trades to manage risk and leverage higher performing trades.
And perhaps the most intriguing part…they have been doing this in stocks for ~100 years, but in sports this type of trader’s approach is completely new by comparison.
When it comes to the stock market I used to feel that I was the one that is sitting down at the table with a bunch of pros and I was late to the game. With sports trading, I am blazing a new frontier because of how I approach making money. I get a chuckle watching all these old school odds-makers and “gamblers” still way behind the times.
It has been over a decade since the last big market crash, which destroyed billions of dollars in asset value in stocks, commodities, real estate and more. The crash was as bad as it was, in part, because the investing masses didn’t assess the correlation risk of their investments.
I shared my story earlier, but aside from that, I don’t really think about it anymore, because I am prepared so it won’t happen to me again. Are you?
0 correlation investing does not exist in the markets we were told it does, but it does exist in sports, and you can apply the same logical approaches you have used in your traditional investments to this newly legalized frontier for traders.
For more information on this and a LOT more, I highly encourage you to take a look at my book; Zero Correlation Investing – The ScoreMetrics Secret. On sale now for a limited time.