Don’t Get Stockblocked
- Joshua M Brown
- November 4th, 2010
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.
You listened to a Stockblocker that knows nothing and doesn't care about the consequences of what he says. I'm going to try to make sure you never do that to yourself again.
I don't have a lot of time to spend on this so I'm going in list form. We're both better off that way.
1. Before reading anything from a blogger, figure out his or her motivation for saying it. If the blogger is writing for traffic or page views, stop reading because your author doesn't actually care about what he's posted other than the included keywords (Paulson! China! QE2! Depression! Crash! Blankfein!). You are wasting your time on something disposable and written for maximum distribution. One post from David Merkel, who writes in the pursuit of truth and successful outcomes rather than traffic, is more meaningful than 500 posts from almost anyone else.
1.5 Politically-influenced stock market blogging is almost as dangerous and stupid. Everyone has political leanings and they are bound to come out when one is blogging each day - but when they so thoroughly infect the blogger's views on markets (i.e. Obama is a liberal from Kenya who wants to raise taxes and Bernanke is an elitist northeast Jew so of the course the market's screwed), you are almost guaranteed to be getting faulty perspective. Avoid those who cannot keep their political views and investment views separate.
2. Headlines are really important on the web, or so the Gawker Handbook says. But they shouldn't be important to you. A really extreme headline or a title that alludes to some sort of impending cataclysmic event is worth ignoring. Let's all stop clicking them until the business model is forced to change. I'm done.
3. Bloggers that are not journalists and have never traded stocks in their lives are writing about the stock market. WTF. Do us all a favor, until you've read Reminiscences of a Stock Operator at least once, shut up. Close your laptop and don't you dare write about trading until you've at least read The Books. Email Charles Kirk if you don't what they are.
4. Stocks are better than bonds and cash. Not always, but right now. They just are. It's not open to opinion, it is fact. They're historically cheap, they make more sense than bonds here and most importantly, they're going up. That doesn't mean everyone belongs in stocks or that stocks should be 100% of anyone's portfolio - everybody's different and I don't offer advice here.
4.5 Being in stocks doesn't have to be an absolute proposition. I often use stop losses and sell stop limits so that if and when things change, I've taken positions off the table. There will be sell-offs and corrections, there should be and you should be prepared for that. Barry wrote the definitive case for stop losses 7 years ago, Derek wrote the definitive guide to using stop losses last week. Print out both and tape them to your office wall.
5. The economy is not the stock market. Celebrity Analysts and Rock Star Economists need to understand that their forecasts, even when accurate, often mean nothing. Harmony and Melody and Rhythm and Tempo are all components of a song, but they are not the same thing. 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. They too need to read The Books if they plan on discussing stocks and not just the economy.
6. 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.
7. American technology companies do more than half of their revenues overseas (52%), our consumer staples companies are doing about the same (42%). Their executives are not concerned with foreclosure stats in Nevada and you shouldn't be either. All the Pessimism Porn in the world ain't gonna change the fact there are now 30 to 50 potential mini-Americas growing up around the world and two possibly mega-Americas in Asia. Stocks are how you get in on that.
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. They don't know about stocks, care about stocks or feel any responsibility whatsoever for the mixed messages and confusion they are generating for stock investors on an hourly basis.
If your time horizon is of decent length, you know how to protect yourself and you've got real money, don't ever get stockblocked again.
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The Reformed Broker is a blog about financial markets and the economy. Joshua Brown is a New York City-based investment advisor for high net worth individuals, charitable foundations, retirement plans and corporations... More.