Don't Fade This Crowd

  • Posted by
  • on March 11th, 2010

I’ll confess…my initial reaction is to fade almost any investing idea I hear.  Why? Years of running a retail trade desk, followed by exposure to the nonsense put out by financial media like CNBC.  In general, it has served me well, making me aware that an idea was already exploited if I heard it too many times.

I do my best now to avoid snap judgments regarding the value of anyone’s idea, but I’ve grown to actually use the ideas of talented folks around me.  For that, I blame(thank?) Twitter.  What separates this unique medium is the ability to listen only to those who’ve proven their worth.  I’m still exposed to what seems like an infinite stream of information, but the difference is it consists solely of sources I’ve vetted.  This difference is as subtle as a sledgehammer.

Instead of information coming to me in the format chosen by some media exec, it comes unedited from the keyboards of the most talented folks in the biz.  OK, maybe Paul Tudor Jones or John Paulson aren’t conveying their thoughts to me, but it’s a hell of a step up from Pisani and Battipaglia!  WAY too many good folks to mention in this post, but start with the StockTwits Suggested List and figure out who provides value to you.  Nothing against journalists and their bosses, but how could they possibly provide me with the same usefulness as someone whose livelihood is based on taking money out of the markets?

We can only process so much info in one sitting…every minute we waste on a useless article is a minute we could have spent learning, or at least laughing.  Cut the dead weight every week,and maybe check out someone new.  I think you will learn, as I have, that a consensus call from a talented group is MUCH different than a consensus call from a random group.  One can be followed and one can be faded…it is the difference between profit and loss.

Perhaps, like me, market speculation is very personal to you, and you follow only yourself.  I can say that if I saw a few of the best lined up against me, I’d review my logic.  There are thousands of bad investors and traders out there…picking a fight against a group of successful operators is not the best approach.  This past week’s vacation gave me another chance to observe from a distance the difference between groupthink vs. smart players using different inputs to come to the same conclusion.  It’s a devastating combo that rarely lines up, but when it does be sure to pick the right side.

The information in this blog post represents my own opinions and does not contain a recommendation for any particular security or investment. I or my affiliates may hold positions or other interests in securities mentioned in the Blog, please see my Disclaimer page for my full disclaimer.

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