Are you a news addict? A market junkie? Are you fully functional to walk away or are you hooked? Do you need the fix on your television every day? Can you make it through the trading day without the bias and noise? Just grab the morning's econ numbers and step away; cold turkey? I triple-dog dare you.
Ignore the plethora of pontificating pundits [or as I call them *smidiots*] chanting that the market is cheap. The CEO's cheerleading for their own product; always painting a rosey future picture [even if they have to change that forecast down the road]. Seriously? Can you say bias? Turn off the clowns whose job is to entertain you as they "educate" and convince you to "buy buy buy!". The *anal*ysts playing tug-o-war, "my way is better" over sectors; each with his own belief system of valuation. P/E is the way to go. No, it's price to cash flow, tangible-book-value, forward earnings vs. TTM [trailing twelve month for you newbies] or whatever justification they can find to convince you and every other viewer just what to do with your hard earned savings and 401k........buy.
THAT is their JOB.......not only keep you informed, but to entertain, keep you in the loop, motivated and energized. You know you need to do something with your money and why would anyone on a syndicated television program lie? You're subconsciously seeking approval. The big "o.k." and you're not alone. Humans have the natural tendency to seek out information that confirms their preconceptions, independently of whether they are true. Confirmation Bias is, after all, a wonderful thing.......or is it? It gives one the illusion of being in control, knowing [or believing in knowing] what's to come.
Traders also have a tendency to follow others trade tweets and blog recommendations. If you've ever played Roulette and watched others place bets on the same numbers as a *hot winner* at the table, that behavior is considered Illusion of Control by Proxy. Believing his knowledge of the game, odds or luck must be superior to yours......so you follow him.
It seems natural that when actively trading, one watches CNBC, Fox Business and Bloomberg for guidance, reassurance.. They, after all, have far more knowledge and insight into the market than you [or me] in what lies ahead. Even if they made mistakes in the past a la Cramer's "Bear Stearns is fine" call, Meredith Whitney's 2010 warning on Muni bonds or Doug Kass's 2010 short bonds call, we give them a mulligan and continue to watch the hype. As we hear news [bad or good], our confirmation bias takes over and we scan the news and blogs as we seek out those who we believe are more informed and/or more experienced. Who we trust.
The bias is the same if you have a negative outlook. Consider: when it comes to Mr. Market, for every buyer there is someone selling. For every analyst on your screen saying your stock [or the overall market for that matter] is sure to head higher, there is another analyst who can justify the opposite. Another ZeroHedge, Dshort or Marc [Dr. Doom] Faber who pounds the table, screaming the market is going to implode [at least that's how it seems]. They appear consumed with attitude polarization for whatever reason and will never be happy no matter what the econ. news. Every headline is fraught with internal weaknesses confirming their negative view.
Somewhere in between there must lie a happy medium.
What would happen if you *didn't* watch them throughout the day? Will the world end? Market implode? Volumes dry up and the stock market as we know it, come to an end; crashing to zero? Will news television cease to exist? Certainly not. The sun will rise tomorrow and money will continue to flow. One thing you will notice.........is your trading improves. Tuning out news television forces you to sit on your hands and look past the glitz and flashing lights, truly focus and invest based on fundamentals, the larger macroeconomic picture and what the charts are telling you.......yes just like the big players.
Maybe, just maybe, it forces you to invest based on your own convictions, your own beliefs. Not based on today's option flow. Not based on a CEO attempting to reassure nervous investors to retain his market capital. Not based on a smidiot who, quite frankly, could care less if he's wrong tomorrow and you lose $500. He's made his millions. He has his contract and a steady job. He tried but he guessed wrong. Oops. All he has to do it appear contrite next week and he'll get another mulligan once again.
Confirmation bias however comes with it's own risks. Anyone remember Lenny Dykstra? Lenny, or Nails [his nickname], was a former Major League Baseball player for the 1986 World Champions, NY Mets and the 1993 National League Champions, Philadelphia Phillies who was called "one of the great ones in this business" by experienced ex-hedge fund Manager Jim Cramer. He was so good, he convinced veteran Wall Streeters he knew his stuff with options strategies so complex that veteran reporters were left confused. So good, he was a guest on CNBC [you mean not all guests are credible?], issued his own newsletter "Nails On the Numbers" and was granted a premium service on theStreet.com with an enormous following, only to go down in flames charged with fraud, theft and more. While some will say Lenny was an anomaly in the business, my point is that thousands every day tune into news television, Twitter and the web for confirmation, guidance and insight. Thousands every day who are watching no more than a dog and pony show............[you're not going to like this] instead of using their brain.
I'm the first to admit that after 25 years in mortgage banking and self-directing my investments, there was still an enormous learning curve when it came to actual trading for myself. Beginning in 2001 wasn't the kindest of all periods during which to make the plunge however it taught me a great deal:
- Don't believe everything you see or hear on television. Some guys were still fighting the trend in 2003 long after the dot.com bubble had burst and 40% of SPX market capitalization had evaporate.
- Learn your moving averages; especially those on longer time frames. Big money buys at 50month, 100month, 150month, etc. levels. Why aren't you?
- Be extremely skeptical of any bearish charts you're given which only reflect a 3-5 year history and patterns. You'll see tops and they'll scream doom and gloom when in actuality, going back over historical charts you'll see the identical patterns over and over and over again and guess what? The market survived! In my mind, any chartist that urges you to invest this way, should be removed from your *trusted* list. Go ahead and read if you wish but make darn certain you're not investing your capital based on "theory" and speculation. Let the charts show you the way.
- Bubbles come to an end.
- Every momentum move eventually loses steam and the market *shifts* in a new direction; seeks out new leadership.
- No one knows it all. There is no "holy grail" of trading. After all if someone has the holy grail, why does he need to sell it to you for $499 with no guaranty?
I've been through the lies, the clowns, the *anal*ysts who were right and wrong. The twitter names who faded into the sunset and others who went subscription only. I had margin calls some mornings and woke up with enormous winners others. I made it through two huge downturns which many weren't so fortunate. I was happy program trading, swing trading and doing my own *thang* but then a fellow trader [yes Ryan Romero, that'd be you] urged me to cut out news television and see the difference.
Once I did [turning it off or muting after the morning's econ news releases were over], things changed dramatically for the better. Before I hit any button, I made certain I wasn't lieing to myself [even if it was against what the pundits were saying], talking myself into a bad trade with high risk. It was no longer trading on emotion because I *might miss out* as the tv *anal*ysts implied. It was trading based on technical levels with a longer hold period and less fees [sorry Mr. broker but my commissions are far less than year - no Pointsetta for me]. As a shameless plug I must also give credit to my fellow StockBuz members as they too, are wonderful at voicing concerns when they thought I was wrong, looking out for one another in seeking he *good* trades and collaborating on just where are the best levels to buy. They do a great job of knocking that little devil on my shoulder saying *buy buy buy!*.......right on to the floor. We've hit some outstanding moves these last few years; not just in momentum stocks but in TLT, UNG [yes!], BRK.B, WAG, the top in Copper, Silver and Gold, ANF, DECK and many, many more. I cannot say enough about the camaraderie and open sharing platform all for a FREE membership. Thank you guys/gals for always having my back.
We luckily also have the internet, with tens of thousands of websites to research with which we can learn, expand our knowledge base and ultimately come to our own conclusions on market direction. News television is no longer the end-all-be-all when it comes to investing and if you feel that it is, Sir you shouldn't be trading.
Getting back to the main subject somewhere, I think the reason I love the market is because you never stop learning. The market is a journey with endless new horizons. Always changing, always shifting, always evolving. It's not that pundits on news television aren't providing a service; they are and for the most part they do their best. It's also not that they should be expected to be 100% correct all of the time but one has to understand that they have a motivation or bias for keeping you glued to the set. It's called job security and they've got a hot winner guaranteed not to lose right after the sponsor-paid-for commercial break.
Comments
CNBC ratings dive to 7 year lows http://www.talkingbiznews.com/1/cnbc-ratings-hit-seven-year-low/ Get Cramer off the morning, find a solid, no-nonsense replacement for Mark Haines and take Bartiromo off of the Closing Bell. Watching her struggling to pronounce an "R" while talking with any authority to a CEO is a joke. Augh.
I especially love how they devote 80% of the day to the [what I call "silly"] fiscal cliff BUT from what I understand, little-to-nothing was attributed to the anniversary of Pearl Harbor. Yep more "hype the cliff for ratings". Sadly people will watch it. Consider this if one is worried about the fiscal cliff from an economic standpoint: If $800mil in stimulus did little to help the economy, how much real harm will be done with $600mil in increased taxes? Puhlease. Yes some benefits will expire which will finally pressure the Capital Hill clowns to do their job and checks will be cut retroactively. Time to pay the piper for 20 years of tax cuts. Enough with the hype.
In my opinion 95% of AAPLs fall is tax selling AND the consequences of having just about every fund out there in the name; plain and simple. Yes our rally is a little long in the tooth. Yes, their margins are shrinking going forward [just as everyone else's are] however one has to believe there is much pressure on Tim Cook to deliver a solid TV experience after the disappointments with Siri and Maps. Now they're ALL taking partial profits ahead of the tax hike......a hike which should have taken place a year ago. Buying opportunity for sure BUT there's no way to determine if everyone has taken sufficient profits at this juncture. It could persist. I'm watching the 20month SMA near $518 and $465 or the 100week SMA as another important support. Historically a lot of investors have their stake there *and* $463 is coincidentally the 38.2% fib level where shorts will take profits.
At the end of the day, one is much better served to put the TV on mute and play the charts and fundamentals like the big boys. They certainly don't make their buy/sell decisions based on any guy sitting in front of a camera and neither should we.
Bravo! Heartwarming, touching, great storyline! lol Seriously, good job! Just to add another perspective, I have CNBC on all the time during market hours, but I'm only paying attention to it for contrarian indicators. For example, this week has been the question "what's wrong with AAPL?" If I understood AAPL the company better, I would probably be more inclined to buy into a position at this time. Of course I would have to have a sufficient margin of safety, but I certainly would be inclined to move contra to what most of the so-called pundits are saying right now.