Understand from Where Expert Opinions Come
The development and growth of the internet has been a fantastic boon for folks everywhere. Never has so much information been so readily available to anyone seeking access to it. A quick search can bring up loads of web pages devoted specifically to even the seemingly most obscure topics. Traders and investors certainly have been happy and aggressive users of the available information, and also quite ready providers of news and opinion.
There’s a catch, though.
The internet is essentially a completely open forum. Anyone can post anything. Some of what’s out there is completely incorrect and other stuff is very misleading. It’s important for the surfer to be able to ascertain what is valuable and meaningful to avoid getting turned down the wrong path all together. I think most folks understand that.
But what about the information and opinion coming from the media? That stuff is supposed to be responsible and factually correct. By and large it is. That’s not really my concern, though. Rather, it’s the opinion stuff coming from the hordes of “experts” trotted out each day.
Don’t get me wrong. I’m not saying these folks aren’t knowledgable or out to mislead you in any way. That vast majority are honest and well intended. While I don’t really pay a heck of a lot of attention to what most of them are saying beyond factual information, I do keep an ear out to their collective voices to allow me to ascertain market psychology.
The thing that must be kept in mind with anyone who’s opinion is being presented to you (in the markets and in the rest of your life) is where that person is coming from in their viewpoint. People’s opinions will be colored by the things which influence them. For example, someone in a long position, or who has expressed a bullish market opinion, is likely to register positive events more strongly than negative ones. In the markets that’s referred to as talking one’s book. It’s not always a conscious thing. Knowing that this individual has a long position allows you to understand that there may be a bias in her/his opinion, which is why folks are often required to disclose such things.
But it’s not always as clear as whether or not a market commentator has a trade on. There’s a very good posting on the Dash of Insight blog on this very topic.
I bring this all up because I’ve found it very interesting to watch the varying opinions the different talking heads have expressed about what the Fed should/will do about interest rates. It’s impossible to know what kind of biases all of these folks have and what might be influencing their viewpoints (though some are rather obvious), but every little bit helps. In particular, I watch for signs of strong emotion. That’s a good indication of someone probably not thinking very rationally, which makes the value of their opinion at least a little suspect.
The point is, try to know from where your information is coming so you can properly ascertain it’s true value to you.
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