I try to learn something new every day. Last week, I learned, for example, that the immortal Dr. Seuss children’s book, Green Eggs and Ham, was written on a bet with Random House editor Bennett Cerf. Mr. Cerf bet Theodor Geisel (Dr. Seuss) that he couldn’t write a book using no more than 50 different words. Mr. Cerf lost that bet and generations of children are better for it.
Source: Tales From an Open Book
Why is this on an investment blog? Because if there is one important takeaway it is this: it doesn’t have to be complicated to be good. Green Eggs and Ham is marvelous, and also marvelous in its simplicity.
When it comes to simplicity, nothing beats relative strength. It uses only price and maps the constant adjustment of the relative performance of one asset to another. Stay with what is strong; avoid what is weak. Rather than attempting to forecast, price simply reflects the verdict of the market after weighing all of the transactions between buyers and sellers-who are most definitely interested in arriving at the correct price. The long and profitable track record of relative strength suggests that simplicity can be a good investment strategy.
Hat tip to JP Lee
