Monday, February 06, 2012

Puplava: listen to what the markets are saying

While catching up with Chris Puplava's latest market update last night, I had to stop and share some of his words with our followers on Twitter

Read the opening of Chris' article, "Stop Talking and Start Listening!". You'll find some worthwhile comments on interpreting data and the importance of maintaining accountability in one's market calls. 

"...Far too often investment managers and economists spend more time espousing their views and then defending them until eventually proven right (“I was just early”), rather than spending more time analyzing their assumptions and being honest enough to say, “I WAS WRONG!” and then moving forward. 

Part of the problem is that they create a view and then find evidence to support their views rather than starting from the bottom up by collecting an exhaustive amount of data and then summarizing the collective message rather than their views. 

Basically, listen to the message of the markets and then interpret those messages rather than telling the markets what they should be doing. What the market IS doing is far more important than what you think the market SHOULD be doing...

This is an excellent summary of one of the biggest problems I see in the 24/7 cycle of market commentary and trading. People have become too enamored of their own market view/"thesis" and too concerned about the risk to their reputations to come out and admit they're wrong.

Of course, if you are tied to a certain view or position and can't admit you are wrong, it could have an adverse effect on your trading or investing returns. Some people may hesitate to cut their losses on a bad trade or reverse their position (say, by going from short to long on a certain security or asset) if they've anchored themselves to a privately held or publicly expressed view.

Now that blogs and real-time social networks have allowed us all to become "mini-pundits", the risk of spouting off in public and ignoring the message of the markets has shifted down from media stars and big-name fund managers to the rest of us. 

But guess what? That also provides us with an opportunity to face the music and occasionally admit we were wrong about something, which may actually help build trust with our audience (and in ourselves) in the long-term. 

Because let's face it: no one wants to listen to someone who is never wrong and is always (magically) right. Why? Simple. Such people don't exist, oracles and sages of mythology aside.

Now back to the macro view. Despite some well-known recent calls for recession from ECRI and others, Puplava feels the markets and economy are in "bullish harmony" and are sending us a message that there is no bear market or recession ahead. Take a look at the article and examine the arguments for yourself. 

And remember, hold yourself accountable for your own market actions and judgements. Try not to impose your views on the market, and try to be flexible in your trading, especially when it comes to admitting you are wrong about something. Your thinking and your results might improve!

Related articles and posts

1. Zen and the Art of Trading.

2. What makes a great trader? Managing risk.