Mixing and matching is famous in the garment industry for being useful. Matching is also an important part of nearly ever sport, especially the team sports like football, basketball, and baseball.  For example, good coaches and managers often try to identify situations in football and basketball where a superior player is being defended by a player who cannot guard them because of quickness, skill, height, strength, or some physical attribute. In these team sports, what you discover is if a team cannot defend, especially at the end of a game, it will not win, especially against superior teams. The observant reader might ask, how does this idea of matching apply to markets?

Well, I am glad you asked, and the answer is quite simple.  As an investor in any asset, what you are trying to do, in its most basic form, is to identify situations where the price of the asset being offered does not reflect the economic value. Conversely, short selling involves finding assets where the market price is well in excess of the economic value. Both strategies revolve around matching up market price and the fundamental value of the business, in the case of stocks.  Investment firms employ different combinations of the two methods in order to achieve their specific goals for clients.  One can apply the idea to all kinds of different assets, including startups, real estate and fixed income.

However, I should note one asset class where the idea probably is not going to apply is cryptocurrencies, which happen to have soared during 2017. Familiar names like Bitcoin, Ethereum, Ripple, Nearcoin, Peercoin, Monero and who knows what else, have hit all time highs and show very little indication they will slow down. The reason why matching asset price to economic value will not work is because cryptocurrencies, and currencies as well, do not produce cash, cashola, the green stuff, good old hard CASH.  Currencies can be exchanged, as can cryptocurrencies, but as far as generating cash, nope.  Consequently, those who are engaging in the buying and selling of these cryptocurrencies are engaging in what is so eloquently called, ‘The Greater Fool Theory.’  Yes, digital currencies have a place, and now, more than ever, it is for traders.  As for investing in them, well, for myself they don’t quite match up.