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Five Things You Need to Know: It's All About Context, Going To Extremes, Market Dynamics, Real Money, Trust Your Instincts


I'm still surprised at how often spending a few minutes to put pencil to paper can debunk "market wisdom."


Editor's Note: While we congregate in Vail for Minyans in The Mountains 3, we asked each Professor to prepare some thoughts on fiscal literacy, how to listen to the market and their area of expertise.

1) Sentiment cannot be used in a vacuum – context is all-important.

Extremes are rarely absolutes – relative comparisons are most useful.

Just because *everyone* knows something, it doesn't mean *anyone* is acting on it.

Market dynamics are constantly changing the interpretation of common indicators.

What people say and what people do are often two different things – concentrate on gauges of real-money behavior.

Random Thoughts

  • The spread of blogs, sites, RSS feeds, etc. makes new developments fly around traders' radars faster than ever and is making knowing something that others don't a rare commodity – watch for some services to ratchet up fees to take advantage of the demand for proprietary data and analysis.

  • Technological innovations in the coming years will forge new frontiers in technical and sentiment analysis. One small example is Google Trends, which allows anyone to see how the online society in concentrating on particular topics over time. The capabilities will grow exponentially and so will the potential applications.

  • Do you ever get the feeling that no matter what you've done, or what you're doing, someone else has already been there, done that? Me too, but press on…small seeds of uncovered territory can be extremely fruitful.

  • I'm still surprised at how often spending a few minutes to put pencil to paper can debunk "market wisdom."

  • For me anyway, the best trades are not the hardest. My best trades have come when I am confident and feel I have an edge. I've learned to trust my instincts, especially when it comes to trade size, and suggest that those with experience do so too.
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No positions in stocks mentioned.

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