Last Monday, I wrote a post called Top Tick Tyler, which essentially pissed and moaned about how the various “this time for sure!” reasons for the market to fall, as offered up by ZeroHedge, had collectively amounted to Jack Squat. (It is probably no coincidence that, on that very day, the Dow Industrials reached its highest level in the history of the universe).
One of my readers took the time to email me a lengthy response. I asked for permission to reprint it, which he kindly gave. Here it is, along with my response embedded in bold:
I apologize at the beginning for the length of this email. You are a swell guy, if anything here offends you, it was not my intent and I apologize even before I begin.
Interestingly enough, any time an email begins like this, it’s usually a very thoughtful and friendly missive.
I have been a long time reader of your blog, been reading it since the bad old days of 2009 if I recall correctly. I want to thank you for the good work that you have done over the years, and most importantly, your honesty about your trials and tribulations which I find very refreshing.
But I am writing because one of the recent articles that you wrote recently just ticked me off. The post was called “Top Tick Tyler” where you shared some justified disgust with EWI and the Tylers. Before we go deeper into the issues here, I want to point out that I am a professional investor managing money professionally for last 4 years, doing tolerably well despite being what is colloquially described as being a “perma-bear” or “doomer-gloomer” in a predominantly a long biased emerging markets equity fund. So it is possible…
Along with your blog, I have also been reading Zerohedge and EWI since 2008. Back then, I was a newbie banker digging around for explanations on how the world could go from “rainbows and unicorns” to “Woodland Critter Christmas” (I know you know what it is) in record time. My education is still ongoing. Now I am writing to defend two of my “resources” from another one of my “resources”. Lets get started, shall we?
Anyone who makes even an oblique reference to the Woodland Critters has my attention………and my respect.
1. Everybody is biased. I am, so are you. So is Prechter, EWI and Zerohedge. There are no “pure” fundamentalists or technicians on the face of this planet. That is why, despite being a pure technician you keep looking for a market top, and your hands waiver before you place a long trade. You have documented your trials and tabulations in some detail on the blog. Just imagine being Robert Prechter and being sniggered at publicly on National TV. Do you think he likes it? These guys carry their bias on their sleeves, they deserve a lot of respect for that fact alone.
I agree, and believe me, before I wrote that post, I cautioned myself that “those who live in glass houses should not throw stones.” So I tread lightly.
2. Both these outlets are trying to run a business. All of us who do that have to pander to our audiences. This is especially true for all the sensationalism at ZH. It is your job as an active reader to filter out and correct for these biases.
3. For EWI specifically, I used to be one of their subscribers but stopped about 2 years back. Elliott wave does allow you to have way too many possible options in the short term. My problem specifically was that they were not being self aware enough to be skeptical of their own work (Pretense of knowledge) . But having read most of Prechter’s books, I believe that they provide a useful perspective without you having to agree with all of it. As per EWI itself, it is a useful too for a contrarian, if you are willing to use your own head and be skeptical of your own abilities as a wave counter. But my personal opinion is that without fundamentals backing them, all wave counts are essentially junk.
I agree here as well, and I want to add a comment that I didn’t mention in my Top Tick post: I actually found EWI to be incredibly accurate, almost to the point of clairvoyance, during the throes of the bear market. My beef is that, for the duration of the past six years, it seems to have completely and utterly missed the boat, calling for an imminent collapse in prices virtually every step of the way.
4. Your beef with ZH is essentially that their reporting has no effect on asset prices. As you mentioned yourself, 99% of the people don’t care what’s written on it, so i don’t see how this is a surprise. What they write is worth knowing about whether you agree with them or not. Just yesterday there was an article about the oracle of Omaha and his crony capitalist ways. Though not really news, i think it is 100% worth knowing. Especially when most of the Americans have such touching faith in their government. On the whole ZH is a force of good in the world.
Here again, I absolutely agree, and I would point out that in my Top Tick post, I seriously and sincerely suggested that ZH should, in a just world, be given the Pulitzer Prize for journalism.
5. In the words of the patron saint of your blog and my personal Jesus George Carlin “Just picture an average guy and how stupid he is. Then realize that half of them are stupider than that!”. I personally don’t ever read the comment section on any blog because it is usually a stream of unadulterated bull shit. I have been trying to get off Facebook a week after I got on it. All comment streams express the lowest common denominator which is worth bothering with only to bet against. Comments do not make or break a blog, content does.
In the case of Slope of Hope, I think the comments section actually does make the blog. Slope has an amazing community, and its comment section is ten times more active than that of blogs a hundred times larger.
So far we have been talking all general riff-raff which you are aware of even if a bit frustrated to see through clearly. Here is the bit I hope you find interesting.
6. A mental model that I find useful for understanding the psychological aspects of investing is that of a poker game ( the other is of a masochist, but I digress). cliched i know, bear with me for a bit. What is different this time is that this table has, among other people, you and your “unconscious self” as separate selves. That is why investing is so hard, because at all times you play against other people and “yourself” and you also have to beat “yourself” to win. In this game, 90% will lose 5% will break-even and 5% will win. Those are the odds. Now here is my interpretation of the situation as I read this post. Your “unconscious self” is now beginning to panic. It has happened to the best of us : Hugh Hendry / David Rosenberg etc. The last remaining bear in the room i.e you is beginning to panic and has turned on its ideological brothers (ie. EWI and ZH). Your rational self should realize that this must be the bottom of the 9th. Investing is not supposed to be easy. If it feels easy like right now, I would advise you to run to the hills.
I think that is a brilliant insight.
To quote Rudyard Kipling:
If you can keep your head when all about you
Are losing theirs and blaming it on you,
If you can trust yourself when all men doubt you,
But make allowance for their doubting too;
If you can wait and not be tired by waiting,
Or being lied about, don’t deal in lies,
Or being hated, don’t give way to hating,
and yet don’t look too good, nor talk too wise:
If you can fill the unforgiving minute
With sixty seconds worth of distance run,
Yours is the Earth and everything that’s in it,
And—which is more—you’ll be a Man, my son!
truer words have never been spoken about trading / investing
Thanks for a fantastic email, my friend! I appreciate it!