Rhody Trader

Blogging is in the middle of a storm these days as certain high profile blogs such as Zero Hedge are in what seems to be a running battle with news outlets like CNBC. I actually think it’s probably a good thing. In particuar, the  subject of anonymity is one of the major points of conflict, though the press also holds up the lack of editorial standards as being another issue with the blogosphere. At risk of losing points with my blogging peers, I actually tend to fall in line with the news media’s stance on things.

Anonymity
The advantage and disadvantage of anonymity is that it allows someone to say and do things they would not otherwise. It can be good in terms of bringing things to light when might otherwise put the individual at risk. On the bad side, though, it can allow one to engage in destructive behavior without concern for negative consequences. The folks a Zero Hedge claim they use it to keep the focus on what’s being said, not who. I find that problematic, however.

To my mind, one of the most important things we need to know in life is where the biases are with those who seek to offer us information and/or advice, as well as the credentials they bring to offer it up to us. We need to know if it’s reasonable to believe and accept what we are being told. Is it coming from a legitimately knowledgable source? Is the information or recommendation is being shaded by the deliverer, intentionally or otherwise, because of their own underlying motivation? This is important for our own decision-making process in terms of whether we can rely on what we’re being told, and relates to friends and family just as much as with media or online sources.

The NY Post ran a story today that one of the Zero Hedge contributors was given the boot from the securities industry last year by FINRA because of insider trading. That sort of thing naturally sets off all kinds of alarm bells about the credibility of the blog’s content. I tend to want to give people the benefit of the doubt, but can’t help wonder what kind of grudge this guy might have. That sort of thing could flavor his writing and bias his commentary. Oh, and then there’s the whole history of dishonesty suggested by the insider trading charge.

Editorial Standards
Bloggers get things wrong, a lot. I don’t mean all the time, but I see plenty of errors in my travels of the blogosphere and related sites. It’s like the healthcare debate where things are being misinterpretted and blown out of proportion all over the place. It’s one thing to offer an opinion. It’s a whole other thing to present facts. If you’re doing the latter you have a responsibility to your readers to get it right. And it’s a good idea for your own credibility as well because if you share erroneous info and it gets spread you end up looking like an ass.

Obviously, we all make mistakes. We’re not going to get it 100% right all the time. No one expects that. They do, however, expect us to make the effort, to accept the responsibility, and to fix the errors when we do make them. Why? Because people actually believe what the read, it is kind of scary at times.

Conclusion
All the above is why I do not blog anonymously, nor do I post anonymously on trading forum sites like Trade2Win. While I may not agree with Charlie Gasparino on many things, I do agree with him on this. I don’t hide behind a screen name to take shots at people. I let folks know who I am and what my background is so they can make an educated decision whether to take what I say seriously or not. And because of that I take responsibility for the quality of the content I produce. After all, everyone is going to know who wrote it.

Why does anyone care what Nouriel Roubini has to say? He’s an economics professor, not someone who manages lots of money who’s trading actions can move the markets. Why is the market reacting to his comments – or the lack thereof as it turns out was the case yesterday and today?

Maybe it”s a combination of a gloom and doom prognostication, an eye for getting himself in the spotlight, and a general public pessimism in many areas of society these days. In that case, he’s nothing more than the public mouthpiece for a lot of people who share his view. That’s nothing to move markets, though, since presumably those people already have the expressed opinions and have probably positioned themselves with that in mind.

Actually, I know why the market reacted as it did yesterday when it was thought Roubini was turning bullish, or at least lest bearish (thanks to CNBC). It’s a classic example of the market finding an excuse for doing what it already wanted. It’s no doubt that the market was already in a bullish mindset. That sort of thing happens all the time, which is why the same bit of news can have a widely varied impact depending on the underlying psychology of the market.

But I still shake my head at the idea that someone who was bearish at the right time suddenly has this reputation as a great pundit. But then I barely listen to the guy (or anyone else really, if I can avoid it), so what do I know.

I watched a documentary the other day, War Made Easy. The basic underlying focus of the film was how the government uses propaganda to create support for war efforts, and basically co-opts the mainstream media to do so as well. I didn’t find anything earthshattering in what was presented, though the discussion on how the media loses objectivity was interesting. I’d say it’s worth watching.

One of the things that was presented in the film, however, was a bit annoying. There was a set of statistics presented to highlight how the proportion of non-combatant casualties has risen from war to war. It was something like 10% for World War I, then like 50% for WWII. It was higher still for Vietnam, and something like 90% for the Gulf War. That sounds horrible, but its an example of how people either missuse statistics.

Now, it makes total sense that there would be a big increase in civilian casualties between the first and second World Wars. After all, carpet bombing was introduced for the latter and the figures probably also include concentration and other prison camp figures as well. There was also considerable bombing done in Vietnam.

Here’s where we start running into trouble with the numbers, though. The total number of casualties for the Gulf War were a fraction of those those from earlier conflicts. At the same time there was less actual combat and I believe a higher proportion of combatant surrendors and desertions. This makes the comparisson of civilian casualty rates misleading.

I’m in no way trying to justify war or to discredit what the producers of the film were trying to say. My point is instead that statistics used out of context and without proper understanding can lead to incorrect conclusions. This happens all the time, especially when it comes to economics and politics – often intentionally so, which really pisses me off.

Carl Futia announced the publication of his new book earlier this week. He’s rightly proud of being published and it sounds like the book got off to a good start. He’s so excited that’s looking to write a new one. That’s all well and good, but he said the following:

But I need my current book to sell well so that I can find a publisher interested in my tape reading book.

Here’s the irony of that statetment. The better Carl’s current book does the better off he’s going to be self-publishing his second book.

Wiley ain’t going to be happy with me for saying this (they published Carl’s book and my book, The Essentials of Trading), but if you’re already established and can promote the book yourself, going the traditional publish route just doesn’t make a lot of sense. The publishers take most of the revenue and don’t do that much for you beyond printing the copies and putting them in the distribution chain. There are plenty of other options for that, especially in print-on-demand.

I’ve had this discussion with the folks from a popular forum site with whom I’ve talked about a joint book project. The owner of the site likes the cache having a traditionally published book provides, but with a 6-digit membership to his site he can do a lot more in promoting the book than the publisher can. That being the case, why should he accept a 10-15% cut?

And for those who might be thinking otherwise, there’s very little money in books unless you way, way, way up in the upper stratosphere of authors. It’s kind of like blogging in that way.

The Financial Blogger brought up an interesting question.

Which job would you do if you were a millionaire?

Now the question is part of the title of a book which talks about doing what you love and letting the benefits acrue from there. I’ll leave you to read TFB’s post on that subject. For my part I’m just going to ponder what I would do if I were wealthy enough not to require an income.

Part of me says I’d go back into volleyball coaching. I did that for years at the Division I collegiate level, plus ran a juniors club program, and have coached players from ages of about 10 on up. I enjoyed coaching quite a bit and periodically have thoughts of going back. Unfortunately, it beat me up physically, so at this stage it might not be such a great idea. I ain’t gettin’ any younger.

That said, though, education is the core of coaching. I don’t think I’ll ever venture too far from there, in one fashion or another. My trading education blog is something I enjoy doing as a way to help new traders develop. My interests go way beyond trading and the markets, though, so I can see myself working in education in other areas as well.

Maybe I’d even go so far as to get my PhD and teach at the college level. I’ve got a professor friend who’s been pushing me in that direction for ages.

Then there’s writing. I don’t know if I’d ever want to specifically become a “writer” like some authors who seem to churn out book after book, but I definitely have at least one novel in me. I just need to get it out. Writing fiction isn’t quite the same as writing non-fiction, so the fact that I’ve got one book to my credit doesn’t make being able to write a good story a guaranteed thing. I’m going to give it a heck of a try, though!

One thing’s for sure, though. I would definitely continue to trade and invest. I can’t ever see myself getting too far away from the markets.

Barry Ritholtz posted a comment the other day complaining about the number of folks suggesting that we stop the blame game. His expressed point of view is that we most certainly should not allow those who bear responsibility for the mess we’ve gotten into to get by without being indentified. Moolanomy also recently discussed a series of blame based Time articles. I’m fine with all that, but there are two problems I have with the fixation on blaming.

1) Much of the blaming is being done in a “It’s not my fault” way where folks are trying to make themselves look good (or at least avoid looking bad) by pointing the finger at others. Believe me, there is plenty of blame to go around. Anyone trying to tell you that it’s exclusively the fault of one group or institution is either delusional or misrepresenting the facts to suit their own agenda.

2) The process of sorting out what went wrong is almost always best done when the dust settles and rational thinking can be applied to the problem. We are still too close to events to have a properly unbiased general view on things.  The result of trying to sort out blame on the fly tends to be bad decisions made in the attempt to fix or reverse the problems. That’s why I’m not a big fan of this rush to regulation that seems to be going on. It’s almost going to be an over-reaction because that’s the way these things almost always play out.

My major gripe with all this blame business is how Obama and his crew have kept us locked in on blaming the prior administration by constantly droning on about how they “inherited” the current situation. So what? The Bush administration inherited the tech bubble fallout from the Clinton administration. Each administration inherits problems from the prior one. I’d like to see Obama & Co. get over it and stick to forward looking statements. It’s not like he didn’t know what he was getting into. This was a mess well before the election.

Roger at Random Roger posted a question he received that basically asked him whether he believed in efficient markets. That question went:

Do you believe that the markets have priced all known public knowledge and that it is quite challenging to forecast the future?

Actually, the parts about pricing in all known public knowledge and forecasting the future are seperate things. In-efficient markets aren’t necessarily easy to forecast, after all. But I want to comment on the first bit.

I have the advantage of watching the markets all day long.

Then again, maybe that’s a disadvantage. I’ll leave that up to the reader to decided.

Anyway, doing my daily forex market analyst work I get to see how the market reacts to data. The one thing that is very clear to me is that the distribution of and reaction to new information is nothing close to instantaneous. I have seen over and over again some meaningful news item come out and it take considerable time for the market to react. And of course sometimes the market hyper-reacts. Traders do not all get the information instantly, and most definitely do not react to that new data instantly. It takes time for things to filter through.

The forex market is a perfect example. If data comes out during US market hours when Asian traders are sleeping, when are they going to react to that information and make it market of their analysis and/or trading? Not until some point many hours after its release.

The other thing I would toss in is this. Not everyone who will trade based on a certain bit of information will even look at that info until well after the fact because they were not immediately focused on the market in question. A perfect example is someone who trades the stock market and periodically looks for new stocks to play. They might have a stock come through their screener and they go back to do the fundamental analysis. It’s only at that point that they are incorporating prior information into their analysis.

This is a big part of why from the time I first heard of the Efficient Market Hypothesis I thought it was a crock.

Barry Ritholtz recently started a discussion about financial television and what needs to be done to make it better. Adam at the Daily Options Report, among others, picked up the thread and added his own thoughts. I’m not going to run through all of what Barry pointed out, but there are a couple of gripes I agree with.

First off, the talking over each other part is something I can’t stand. I’m probably going sound crotchety here, but basic good manners dictates that you don’t interupt someone else when they are talking. It’s plain rude, and it certainly doesn’t help the viewer/listener at all since the result is usually that you can’t hear either person.

Secondly, I’m all for healthy debate, but straight up conflict is something I don’t tolerate particularly well. It’s a waste. I understand that for a while there CNBC had a producer who leaned in that direction. That was the time of the octabox and the hosts intentionally making stupid inflamatory comments or asking inane questions. Things have gotten better since that producer left a few months back.

Third, if you have someone good on, give them enough time to explain their views. Bloomberg seems to do this better than CNBC, with longer interview segments, though the “guest host” thing CNBC does helps.

One last thing I’d toss in here is more along the lines of social commentary.

It would be really nice if when CNBC runs segments talking about politics or things related to government policy that every once in a while they included a black commentator who was in opposition to Obama in some fashion. I can’t remember a time when when there was a black face and a white face on the screen that the former wasn’t generally supportive of the administration and the white one in opposition. For the sake of social harmony, can we mix that up a bit so it’s not quite so much a black/white thing?

Apparently, Sheila Bair is now considering a plan I suggested about six months ago.

http://www.businessinsider.com/sheila-bair-open-to-allowing-banks-to-launder-trash-assets-2009-3

Hmmmm….

There’s an article on the Time website I found interesting. It’s Is Genius Born or Can it Be Learned. As the title suggests, it talks about the whole nature/nurture debate.

Of course this is also the subject of one of the classic trading movies, Trading Places. In the film the Duke brothers place a wager of whether they could turn a petty street hood into a premier trader and at the same time turn a great trader into a homeless person (basically). Hilarity ensues.

The time article doesn’t really resolve the issue. It just highlights the points of view on things. They run from genius being exclusively genetic to it being learnable and points in between.

I recently became a member of Mensa, which is the organization for folks with an IQ in the top 2%. I’ve known for a while that I’ve got a bit more than average intelligence, but never really got around to finding out how far it went. Since joining Mensa, though, I’ve found myself looking back in life to recall times when others have identified me as being smarter than others. I never really thought much about it along the way, though. It was kind of like the guy who is completely oblivious to the crush a girl has on him while all of his friends see it plain as day.

My own personal view on the nature/nurture thing is that genius probably requires a base intelligence starting point, but also requires stimulation to properly develop. It’s kind of like a premier athlete. They may be able to run fast and jump high, but without specific training and experience they will never become a star.