I had a good week. But enough about me. I want to talk about you. You of the FinTwits ilk.
It’s not that I know you’re wrong. It’s that I think you’re full of shit.
— Old Bull Lee (@davebudge) October 2, 2015
I know it’s impolitic to pigeonhole people but I’m starting to see some clusters of Financial Twitter personality types that tempt me reach for the hemlock. So, in no particular order, here is what I have so far:
This group comes with handles that imply an unusually sized trading meat stick endowment. It’s a special club with names like @MonsterAlphahedge, @BetaPlayah, etc. We’re informed they’ve already made every mistakes a trader could make. With those lessons learned, they are now immune to both significant losses – also gravity. And for a fee you too can become a billionaire. But if it doesn’t work out, well, you’re on your own. A strict no refund policy is observed.
I imagine, in real life, that if you compare these people to boiled turnips the turnips would be more fun. It’s not that they don’t occasionally have any useful market insights but mostly they spend their time picking the fly shit out of the data pepper. Every obscure and esoteric data set they present comes with a tone so serious that, if you don’t pay attention, the market might harvest your genitals.
This is a special group of genius that calls bullshit on every market prediction from every living market legend. The binary response is either A) they’re wrong or B) they’re made in bad faith to move the market. Everyone is suspect. There are no good faith arguments.
If confirmation bias could make you rich these types would rule the friggin’ world. It would be one thing if they ever laid out their own case but these guys simply find a narrative that supports their position and then try to beat you to death with it. If that’s not bad enough, the shear volume of bias confirming re-tweets shows up in your stream like the effluent in a broken public bus station toilet.
Be it far from me to curate anyone’s follow list. Personally, I’m working on reducing my Twitter consumption. I have found that both my mood and my productivity are much better off by ignoring most of it. Few people have a similar investing discipline as mine and the short-term traders do little but interject emotion into attitude.
I suppose the mountain of “if A happens then B – but we won’t know for a few days” tweets are good for people who can hop in and out of the market. I can’t do that with my clients’ accounts. I have many position (probably too many) to let the proclivities of a few days market action disrupt my theses for each holding.
So, I’ve come to the conclusion that too much Twitter is the psychological equivalent of intentionally laying down in a swarm of biting chiggers. It’s not enough to kill you but more than enough to distract you from making rational decisions.
Most of Finance Twitter, certainly not all, measure their success trade by trade. Those who manage other peoples’ money have only one standard – total return on assets under management. And we have only one group to answer to – our clients. It’s a game of basis points and alpha comes from positioning much more than trading.
As much as everyone cheered the market rally, I still think the market is expensive. Macro data is soft in the U.S and weak almost everywhere else. That’s not to say that the market is the economy – as proven by Friday’s tape.
My views are much the same as Tim Melvin’s who wrote last week in his news letter.
There simply are not enough cheap stocks to justify a full on commitment to the stock market.
That has lasted for a few years.
To me this market feels much more like 1987 that any other period. That’s in no way predicting a crash. It’s more the level of M&A and the premium being paid for deals. That year, however, left a deep psychological scar on me. It’s probably wise to understand my thinking that it could happen again makes me a very conservative investor. I suspect it always will
So I wait. Try to manage risk in the meantime. And work hard to try to disprove the theses I have on each of my positions.