Friday 05NOV2010 0118GMT
Quote of the day!
Some of the blogs I read post notable market-related quotes; usually the sort of quote from some hallowed, shrouded-in-the-mists-of-time source. They are often reminders of useful rules of thumb, and sometimes they are pious, pompous and less than useful.
Well, I am thinking maybe I should post some quotes (no, not 35/38 sort of quotes, ya smart ass 🙂 ). Maybe some undiscovered classic, maybe some new ones.
Today I have a new one, from Menzie Chinn at Econbrowser (I read this blog in the hope of improving my understanding of economics, but most of it is way above my head …. insert sheepish grin emoticon here). This is the writer’s remark on those commentators that insist 1+1=3, over and over again:
Note: the analysis in this paper relies upon data. If you are averse to looking at data, no point in looking at this paper (you know who you are).
I remember being a newbie to the world of trading/investment. In those days it was tough figuring out where to start & what books to read. I reckon now it is much, much more difficult. Now you have to figure out where to start & what books to read AND what blogs/online sources to read. I have written on this blog before about the danger of reading advice from some of these bloggers, some of whom have no clue, and some of whom, even worse, have motivations completely unrelated to making money trading/investing.
So, if you are a newbie, have a serious read of what I reckon is an extremely valuable post at the Reformed Broker (http://www.thereformedbroker.com/2010/11/04/dont-get-stockblocked/ ) that rings alarm bells about what can be found on the internet, and the enormous damage it can do to you (and your account) as a trader/investor.
Some examples from the post:
If you’ve been kept on the sidelines by the hysterical headlines that are churned out daily on the internet, you’ve missed the greatest 18 months in the history of the global stock market.
The economy is not the stock market. … The economy and stocks and fiscal policy and global trade are related, but not to be conflated. The trouble with academics is that they don’t respect or understand sentiment, liquidity and money flow.
Smart people can be stupid. The well-educated can be wrong, the knowledgeable can persist in foolishness for long stretches of time for a myriad of reasons. An 83% rise in the S&P 500 amidst bad and worsening news on the economic front is not intellectually satisfying and so many intelligent people fought it the entire way up and fight it still. Again, smart people being stupid, it’s nothing new.
Don’t let the ill-informed, click-obsessed bloggers keep you on the sidelines with their hyperbolic nonsense – YOU ARE READING FOR KNOWLEDGE BUT THEY ARE WRITING FOR CLICKTHROUGHS, PAGE VIEWS, UNIQUES AND OTHER SCOOBY SNACKS.
I also particularly liked this article from The Economist blogs. It got me thinking.
In it, the writer says:
it’s not the event itself that moves markets, it’s the departure from expectations.
But what I do appreciate about markets is that they generally react to the news—the departure from expectations. News organisations, on the other hand, will treat the expected as news.
I like this, but I think it is incomplete.
Yes, markets do react to news that is a departure from expectations. Agree … BUT (and this is a big but), markets also react to news that is not a departure from expectations. Does this make sense? Markets are ongoing, they are always on (of course, there are hours when the markets is closed and no trading occurs, but participants are still assessing market-related developments, anyway, I digress, back to my main point). If a piece of information is on expectations, the market is still going to react (this reaction may take the form of a seemingly lack of reaction …. Again, does this make sense?). It is in assessment of this reaction that information about what is going on in the market is revealed. For more on this, study some Wyckoff analysis (check out the blog Enantiodromia at http://enantiodromian.blogspot.com/ .)