Every now and again, someone who’s opinion’s I respect will write something just beyond the pale. I guess its a risk factor for those who write a lot, and perhaps don’t have enough time to really engage in deep thought about what they are saying. (I generate alot of "content," and this was a wake up call to me).
Consider this (unnamed) writer, who I typically have some regard for:
‘Big-Picture’ Thinking Will Get You Squashed
"Market participants often feel that it is necessary for them to form broad theories about where the market is headed. They postulate how interest rates, the Fed, foreign exchanges, macroeconomic factors, energy costs, housing and a variety of other factors are going to drive the stock market one way or the other. The arguments are often superb and the logic compelling. There is something about "big picture" predictions that is very enticing for many market players. The media promotes them constantly and at social gatherings it is usually the focus when talk turns to investing."
WTF?
Lets analyze the theories put forth here:
• Broad overviews about the economy or markets are unneccessary;
• Understanding the intersection of the Fed, foreign markets and macroeconomics is counterproductive;
• Avoid arguments that are "superb"
• Steer clear of logic that is "compelling"
I get a sense of "Truthiness" from this writer, that these annoying, biased facts are somehow interfering with trading.
The really funny thing was that prior to reading this anti-Big Picture commentary, I just had read not one but two separate comments about the importance of an overview — of being a great generalist, doing lots of reading, and learning all sorts of things beyond your own expertise. You know, "Big Picture" stuff.
The first was from Warren Buffett’s partner, Charlie Munger:
On the importance of reading: "In my whole life, I have known no wise people (over a broad subject matter area) who didn’t read all the time — none, zero… You’d be amazed at how much Warren reads — at how much I read. My children laugh at me. They think I’m a book with a couple of legs sticking out." –Charlie Munger’s Worldly Wisdom
The second commentary was from Barton Biggs:
"Reading is definitely my thing, too and I think you have to read not just business stuff but also history, novels, and even some poetry. Investing is about glimpsing, however dimly, the ebb and flow of human events. It’s very much about breasting the tides of emotion, too, which is where the novels and poetry come in. Besides, sometimes you have to refresh your mind and soul by consuming some crafted, eloquent writing." –Hedgehogging
My own experience comports with that. Becoming well read, educating yourself on a variety of subject matters, being able to place the course of society, the economy, politics, and investing into a larger context can only help.
Do I really beleive this stuff? Hell yeah. Enough to have named this blog The Big Picture.
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Facts? Logic? Superb Arguments? Who needs ’em!
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UPDATE June 6, 2006 11:02am
Okay! The cats out of the bag in the comments.
Yes, that was Rev Shark from Friday.
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barry,
i hope you saw i had your back on that one. i was the guy who told rev he’s an outright hypocrite with much of his comments, especially his comments to farley a few weeks ago and his so called lack of tact.
where’s his tact with making the “big picture” comments. didn’t take much to see where that was directed. it seems you rub him the wrong way. i would hate to be looked at as in the “rational fringe” (sarcasm explicit) of investors.
keep up the good work.
Barry
I think the big picture will ultimately prevail but over days, weeks and months short-term speculative market forces can falsify what the big picture is telling us.
As an accomplished psychic, seer, soothsayer, con artist, scammer, etc my prediction some time ago was that today would be the last day before the count down to the end of the world. That is why the stock markets are nervous. Mister Market is all knowing. It has nothing to do with this “Big Picture” bullshit. How do I know this? Jesus told me in our last working session. It is part of the coming apocalypse.
The rational for the move? Today the AntiChrist is born. Or at least in the movie. The date? 6-6-6
Big Picture analysis is for the birds. Get yourself a Ouija board if you really want to make money. Btw, get out of stocks and put all of your money in gold. Gold is the devil’s preferred currency.
Barry, where’s the link to the original piece? It doesn’t seem kosher to pull a single paragraph out without letting people see the context.
Big picture thinking with a focus on the fundamentals matters to investors, without a doubt. I guess short term trading and speculating less so.
the dear rev is at it again over at the Steet. you may have inspired him to keep up his end of the stupidity.
“The stock market is being held hostage by a nefarious group of individuals with doctorate degrees from prestigious institutions. They claim to have our best interests in mind but possess no practical skills and justify their actions based on questionable abstract theory. ”
yikes, seems as if the good reverend is starting to sound like all the other born agains.
Carl Sagan lamented that he was sometimes derided for being “obsessed with reality.” When I was an undergraduate, a fairly smart classmate of mine decided that he could win a debate with me by accusing me of “only caring about facts (about 1/3 of the students in the class thought this was both funny and true, while the other half and the professor had a look on their faces that asked, “is this guy retarded”?).”
Americans are famously anti-intellectual. Hence the rampant belief in creationism/ID, UFOs, faith healers, John Edwards, etc ad nauseum. Rev’s thinking squares up nicely with triumph of feelings over logic in this country.
that should be 2/3s – maybe I’m the retarded one.
I quite liked (even if it is not smoothly written) another ”big picture” book that is almost as good as “Hedgehogging”:
http://WWW.Harriman-House.com/pages/book.htm?BookCode=21815
He advocates broad-based trend investing, because trends are more reliably identified than crazy short term oscillations.
Or conversely at the opposite extreme, investing in random early stage small companies, simply because they tend to be underpriced.
As you are my favorite blog and I agree with you on so many things from housing to Danish Blend, I must say that as a professional tape reader, I often think that my fascination with Big Picture Macroeconomics is nothing more than mental masturbation.
We read the electronic futures tape with custom software all day long, and IMHO, massive program buying and selling (or lack thereof), is what determines the market’s movement.
Creating any sound link between market movement and data points is too much work with too many variables to use to ‘invest’ in the stock/futures/commodities markets. Not that I know many ‘investors’ besdies Buffett & Co.
If you are a true ‘buy & hold’ guy, one may conclude that you are an investor, but otherwise, let’s not kid ourselves, we are all traders looking to score.
When watching Kudlow & Co., and here a bull or a bear postulating on some news/data/theory, I always think to myself, “C’mon, how could one really know that? There is another guy on the split screen making the opposite argument and both have some pretty good points.”
If there was a good link, CNBC would be out of business because the talking heads would be unnecessary as everyone would know the theory/outcome/be rich.
As for other markets like housing, yes, I agree that the big picture (which includes crowd psychology) should be used in assisting in decisions regarding buying and selling.
Barry, you’ve got the best blog out there…
Carl
I wish we “Big Picture” people could come up with a new & improved theory of history that will lead to more rational, equitable and smooth global growth and development.
Can economic/social modelling and supercomputers finally make irrational economic chaos a thing of the past?
I hate the THIS HAPPENED so the market DID THAT analysis. The intraday or even day-to-day moves are primarily noise.
However, the suggestion that interest rates, earnings, inflation, etc. are worthless is kinda foolish imho.
Its how to use the info, interpret it, where the art is.
Many people cannot seem to distinguish between data and knowledge, and knowledge and wisdom . . .
Barry,
As a subsciber to Real Money I can tell you that year after year it is the most perma-bull site on the net. Look at the stocks mentioned list and the number of positive comments about specific stocks and indexes is 20 to 1.
So what you bring to all the commentators over there is insult to injury. Until investors learn that business is cyclic and that downside markets are just as able to yield profits as upside ones the investors there MUST make their own silly cases as to why the market must somehow always be invested in.
Remember, when the Nasdaq made 5000, Cramer was calling for Nasdaq 6000, not Nasdaq 1100!
Now, Byno quit mocking me. You are loosely using my favorite term of endearment, retard.
When we were all jabbering about creationism you were quite “on” with the facts. But, as I recall, you were less focused on why. Dr. Spock I presume? lol.
You know, at the time, the thread reminded me a little of the scientist played by Jodie Foster in the movie Contact and her little tryst with the good preacher who was her antithesis. Someone who believed in spirituality and who could have cared less about the science. ie, More philosophically about why. (Hey, you brought up Sagan.)
Ironically, at the end of the movie, she is confounded by her experience that facts could not describe or support. She had spent her whole life thinking only in terms of logic and science and in the end it had failed her. It was almost as if she had experienced an awakening that there was so much more than numbers out there. Maybe an interpretation of Carl Sagan’s journey? Was her character really Carl Sagan who also experienced an awakening?
So, let me take the other side of the trade here. You think “Americans are famously anti-intellectual. Hence the rampant belief in creationism/ID, UFOs, faith healers, John Edwards, etc ad nauseum.”
Could it be instead be that Americans are more instinctive? More in touch with their inner self? Culturally more questioning? Less tied to norms? Therefore, more creative? More open to new ideas? Could that very “flaw” be the foundation for our economic success? Our creative society? Why does such a small percentage of the world’s population control 35-40% of its wealth and nearly half of its new inventions and research? It surely isn’t because we have a lock on intelligence.
Just because someone can prove with a high probability that evolution indeed happened, can you tell me how that disproves the existence of UFOs? Faith healers? Creationism? Near death experiences? The ability of a seer to help the FBI solve a case? You totally discount any of that? I’m not saying I do or don’t but I don’t discount what I have not experienced or do not understand.
Isn’t the more interesting discussion of why? Not the math. You know, it was the question of why that drove Albert Einstein, Isaac Newton and others. The philosophical discussion? What you don’t have the capacity to understand? The meaning of life? Do you ever think about that? I have a good palm reader for you to visit. She’ll fix you right up.
B, you rock.
Jane Roberts / Robert Butts / Seth meet Brian Greene and The Biology of Belief. FINALLY.
That’s the new framework. That is, our thoughts, beliefs, and expectations create the physical reality we experience. It’s that simple!!! HAHAHAHAHAHAHAHA!
I’ve got a lot of value from the Rev’s writing and he writes a lot all day every day, so I wouldn’t dwell a whole lot of thought to that one little mention.
Here’s The New Reality: Dow below 11,000. I imagined it and it came true for me.
Byno – you were correct – the other 17% just didn’t giveashit.
Let us recall “extemes” and the fact that although much is considered so – little actually is.
The problem is not that most folks consider themselves to be knowitalls and above average – it is that most folks don’t want to argue due to the fear of being exposed as knowing nothing. The best, the Sagans, love the argument – it strengthens their theories.
Most often I see what you see but I also see what I see too and sometimes that is not the same as what you see. Who’s right? Who’s wrong? Who knows or, better yet, who cares?
If you get upset over the little things you will lose sight of the big picture so my advice – learn to shake off the small shit – learn that just about everything is – small shit.
B, you might find this intersesting.
Last month at Columbia University I heard a physicist (Space Science and Applied Physics degree), who is now a Catholic priest, say that when he was a practicing scientist, the scientific method gave him no means of discovering the answers to many questions that were meaningful and significant to him, such as: Does she really love me?
I don’t think the criticism of Rev is quite fair. He is a trader, not an investor. Big difference. And if you’re trading, all of the ‘big picture’ speculations can be nothing but enormous distraction and a wall of noise that’s hard to tune out. If you’re really and truly a trader, which most likely means you’re a technical trader, big picture theories may be nice to know but they will do very little to help your trades, and are much more likely to hurt them. Or, worse, turn them into investments. I got his point, no problem.
Barry, I’m a big fan of yours, but on this one, I think you saw a bit too much through your own prism. The plain fact is, for traders, the big picture is better avoided when plying their craft. Out side of that, of course, it has tremendous value. So in your own ways, you’re both right.
I’m not sure there’s anything I know “a lot” about. In fact, the more I learn about a given subject, the more I learn how much I don’t know. I WOULD say that I know more than most about science, religion and music, but that’s about it.
My frustration, and the point I was getting at, echoes Barry’s post, namely:
• Avoid arguments that are “superb”
• Steer clear of logic that is “compelling”
I wouldn’t accuse Rev of avoiding logic and reason, as I am certain he relies on a very rigorous discipline in making his stock selections. And I understand that we can look at the same set of data and come up with totatlly different conclusions.
What I will not tolerate is that because I disagree with you your arguments, if logical, really don’t matter. And what I will fight mercilessly is distorting information to justify a given viewpoint.
I hope I’ve made clear that I don’t mind the debate – I mind dismissing the debate because you disagree with someone’s conclusions., or, even worse, manipulating the data to lend support to a bogus argument.
B, I’ve never seen you use the word retard, but I feel bad now that I’ve used it, so you can have it back. And yes, science and creationism are mutually exclusive. Either light comes from stars or it doesn’t. Either heat comes from the sun or it doesn’t. The earth can’t have four corners and also be round. Etc, etc, etc, etc ad infinitum.
B:
What kind of logic is that? Because you can’t prove something wrong, that means it’s right? You’re not in court here!
To top it off, I can’t say how many times people have been degraded even when proven right. Just ask the one who proved the earth was round!
Personally, I don’t believe there’s anything out there. IMO, all the unexplainable weird stuff can be explained by the simple fact that the human brain is not powerful enough to understand… yet.
I personally feel better knowing there’s nothing out there than thinking about my soul floating around forever, be it in heaven or hell.
The evolution of religion over thousands of years has evolved with our understanding of the elements. But for some reason, people don’t see this and keep on trying to fix traditions and principles in time without considering our new knowledge.
And personally, I find America a little too zealous for my own comfort. I put Bush’s religion at the same level as the muslim extremists. He’s basically shoving his principles down the world’s throat. Is American religion more thoughtful? Well let’s start with “God Bless America” which is ALWAYS used. Why on earth America? Because it needs more blessing?
B sez: “Just because someone can prove with a high probability that evolution indeed happened, can you tell me how that disproves the existence of UFOs? Faith healers? Creationism? Near death experiences?”
The problem is that you can make that list as long as you want. “Can you tell me how that disproves (fill in the blank).”
Methinks there is a link between America’s spirituality and its embrace of rugged individualism and capitalist values… but perhaps not the link you might think.
If Protestant Church Inc. were a corporation, it would be in the Fortune 100. Heck, it might be up there with GE and Exxon. As capitalists, we know how to sell… and spiritual peace is a high-demand good.
In Barnes & Noble the other day, I came across a book on psychic communication with pets (someone had left it on the chair). It was very well done. There are a lot of wacky ideas to peddle, and a lot of ignorance out there to take advantage of.
Though America certainly isn’t unique in the ignorance department. When I was studying in the UK, I heard about a survey that said half of all Britons, or some similarly large number, believed their pets to have human-level intelligence. Critical thinking skills aren’t all that necessary for survival in modern society… hence their decline.
p.s. to Nona: that Physicist turned Priest sounds like the victim of a false dichotomy. There doesn’t have to be an inseparable gulf between science and spirituality. In fact, there is a great need to reconcile them. It can be done, and should be done.
It was just a few days ago you scolded me for calling Cody a retard. But, you can keep the term. I have many others.
So, you believe science and creationism are mutually exclusive? Are you sure about that?
“Either light comes from stars or it doesn’t. Either heat comes from the sun or it doesn’t. The earth can’t have four corners and also be round. Etc, etc, etc, etc ad infinitum.”
So…..what was the basis for their CREATION? The light? The stars? The heat? So, are you familiar with astrophysicist George Smoot’s work with the COBE team? Proof of the missing matter that supported the Big Bang. Big Bang? You mean creation? So, tell me again how science and creationism are mutually exclusive? The entire universe, which is infinite, was created by one big explosion? Huh? And if that was the beginning of time, what led to its CREATION? If there is a beginning, who or what was the beginner? Uh, how about the equations of relativity are not confined in time as we are? So, that would mean there would be no beginning and no end. Sound familiar? “He has no beginning and no end.” Science and creationism still mutually exclusive? Astrophysicists have concluded it is rare that a galaxy has the right conditions for life to exist. One in a billion trillion as I’ve seen the calculation. There are a trillion or more galaxies and ours may be the only one that has the necessary conditions for life to exist. Randomness? Is science proving there is indeed a reason that we wonder what it’s all about? The gambler’s fallacy? What is the most ancient evidence for spiritual expression?
It all sounds like hooey. Just like the Big Bang sounds like hooey. Just like there is no beginning and no end. But, that is science. “I am the Alpha and the Omega.”
I already said in our prior discussion I believed in evolution. My question was the more interesting one. Why? You keep reverting to science to explain the obvious. You’ve got to be a guy. lol. A woman would understand the point I am trying to make because women are generally more in touch with their inner self. That is why men many times perceive women as illogical. Instinctiveness, intuitiveness and creativity are not logical. At your core, you are that person but might I gather that you’ve suppressed them? lol.
So, be honest. We are all anonymous on here. What do you believe beyond science? Is life a random occurence? Are you a spiritual person? Or is it all about the ….uh huh….facts? I’m not talking about Noah’s Ark or talking snakes. I’m talking about there is more to life than you understand it is might be the reason you are here.
Wittgenstein had one of the more intelligent comments on these matters in his Tractatus: Whereof one cannot speak, thereof one must be silent.
B,
I wasn’t on you specifically for bashing Cody; I didn’t even know you called him a retard. I just think Cody’s been more right than wrong.
Second, creationism is defined as a literal interpretation of the Biblical creation story. And you’re right – science can only tell us what happened after the Singularity, not what existed before or why the Big Bang occurred. The point is that roughly half of Americans believe that Adam and Eve are everyone’s great great grandparents. As my wife, an elementary school teacher, likes to say, you can’t pass some of her science tests without contradicting the Bible. So, if you’re 7 years old and want to make an A on your science report, you can’t give answers cooincidental with a literal interpretation of Genesis, yet that is what most Americans believe.
And since we’re already way off topic, I’ll answer your last paragraph briefly. Nearly everyone, regardless of their belief, assumes that humans are a finished product of evolution; that’s simply not the case. We are here because a giant meteor killed off our Cretaceous friends 65 mya, who in turn existed because another giant meteor pretty much killed of nearly all life on earth another 185 million years before that. And 185 million years from now, there’s a 99.999% probability humans won’t exist, given that 99.999% of every other species that has ever lived on this planet is now extinct.
If there is a rhyme or reason to any of this, it is beyond my feeble understanding. Unfortunately, as I get older, my sense of nihilism is only increasing. Hope that answers your question in broad strokes.
lol, it does.
Well said, Byno. But values, wholly as human constructs, may remain, untarnished, I’m sure you agree. That leaves room for love and other things sublime.
On the other hand, if this is all, among other conceivables, a computer program run by vastly superhuman creatures in a superior universe, probably doubtful we’ll ever find out.
Try not to confuse Bush’s religion with his rhetoric. Bush worships money. He hasn’t been to church for more than a photo-op for years. I doubt he’s actually read much of the bible ever. He probably wouldn’t recognize most the stories in it. All of his Christianity is just a lie to get votes. If the religious right ever wakes up and realizes how badly the Republicans have been using them for the past 30 years, they will revolt and never vote Republican again.
Science and religion are not incompatible. Science and fundamentalism are. Fundamentalism is incompatible with almost anything. Fundamentalism is a means for people who are good at rhetoric to control the crowd by using the right keywords to demonize their enemies so that the crowd doesn’t realize their leaders are the ones causing the problems. The Jewish fundamentalists want to kill the Palestinians, the Muslim fundamentalists want to kill the Jews, and both groups want to force everyone to pick a side. The Christian fundamentalists want to cause the end of the world so that Jesus can come rescue them from the horrible world theyre supporting. They are all acting insane. Gay marriage, abortion, and creationism are just buttons the leaders push so that the fundies won’t complain about things that matter. And all of this gives religion a bad name.
Eastern religions seem to be more immune to fundamentalism. Probably because they aren’t monotheistic, so they don’t have holy books that can be manipulated as easily. Taoism is one of the oldest religions in the world and is also one of the oldest scientific traditions in the world. Chinese medicine is still centuries ahead of western medicine on some things, especially spirituality (which isn’t even considered a branch of medicine in the west). Western science will eventually catch up, and then the fundamentalists and the atheists are going to have their world-views shaken up.
Back to the original topic, the big picture means nothing to a day-trader. Last Wednesday and Thursday had nice rallies even though the big picture was the same as earlier in May and this week. The big picture should possibly affect how much leverage and hedging you use, but not much more on the day-trading timescale (for example, now would be a bad time to use full leverage in long positions). It starts mattering more as your average trade duration increases. Anyone that has an average trade duration over a month should definitely pay attention to macroeconomic conditions and the rest of the big picture.
What did the buddhist say to the hot dog vendor?
“Make me one with everything.”
Why did the buddhist refuse novocaine?
Because he wanted to transcend dental medication.
Seriously though, it is interesting how certain tenets of eastern philosophy can be understood in a scientific sense. Everything came from one place (the big bang). We are all a part of the same life force. The universe has no central point, due to its constant rapid expansion, which means that earth really is at the center of the universe. As is every other planet, because the more the universe expands, the more central everything becomes.
I don’t think it’s possible to have a high quality spiritual perspective without incorporating reality into that perspective–reality as science and empirical observation defines it. At the same time, nihilism strikes me as a singularly lousy choice because it’s so unnecessary. There is incredible beauty and rhythm and elegance embedded in the structure of reality as we know it. To miss that is to be deaf, dumb and blind in a spiritual sense.
We could all learn a few things from eastern philosophy. And unlearn a few things from judeo/christian/muslim tenets. Like all of the butchery. Of course, that hasn’t exactly kept Asian cultures from butchery themselves.
Back to market notes, has anyone noticed Yahoo Finance now has real time quotes as standard? Quite nice. I’ll get a buy signal on Friday or Monday if we get a few positive days here. Of course, I’ve said that before and the positive days don’t seem to develop. That’s my first buy if it happens since this decline. Now, will it be a false signal? Uh, it looks a little shitty out there but it does actually look like tech might actually want to run some right here. We are either going to rally here or see another pulse down that is likely similar in size to the first one.
How can this guy on CNBC say the economy is still great? I guess he hasn’t been watching the consumer indices.
Oh, and how about that American offer to give the Iranians nuclear know how? Anyone care to guess where Iran got its current nuclear reactor used for research? You guessed it. The good ole US of A. Isn’t our foreign policy just a thing of beauty. Actually, I think we should normalize relations with Iran it this could just be the impetus we need.
I winced at the Rev’s column, but I’ve stopped commenting there. I tire of his Cramer bashing, and was irked by his recent slights of both Barry and Alan Farley in his comments. The damn “sharkfolio” references from his fellow guppies is nauseating at times. Nevertheless, I generally find his columns helpful.
I’ve concluded that since I possess a terrible bias toward arrogant folks, and many of the people who run money for others appear arrogant to me (excusing Barry from that), then it’s just my problem. That group over there reminds me of a bunch of chickens…..they find something/somebody to peck and go at it!
But the Rev’s column provides a wonderful anchor for folks who are looking for some sanity when the market is going bonkers. I admire his writing style and general sense of objectivity regarding the market..except with posts (and various snide commentary) as noted here. JCC surely doesn’t provide that objectivity, and I don’t see any depth to Cody’s writing. And while I agree that Rev is a trader rather than an investor, I continue to believe that understanding the gap between the “real story” and the market’s reaction is where one can make some realistic risk assessments. Though I’m not a trader, I suspect that having a realistic risk assessment would inform the length of your holding as well as some risk mitigating strategies.
trader75 | Jun 6, 2006 3:04:12 PM,
Excellent. My sentiments exactly.
And, on-topic, Rev is a trader. Traders focus on the market action, and leave the whys and wherefores to those who invest from a fundamental standpoint. Rev often makes the point that fundamental investing is for those who run too much money to be overly nimble.
(And just so you know, Barry, I found out about this post from a commentor to Rev’s blog…and so did Rev. Expect a return salvo post haste.)
I like the Rev’s easygoing style. Very personable guy, seems like he’d be great to have a beer with.
But to be honest, he doesn’t strike me as all that focused on market action.
He seems far more focused on platitudes, lifestyle coaching, football coach wisdom. That seems to make up the majority of his stuff.
For example, these two paragraphs from today:
“The desire to be a master market timer appeals to the ego and is very hard to resist. Everyone likes to think they possess the capacity to nail a market turn like Shaq dunks a basketball. It is only when we come to understand that what is driving us in this quest is emotional rather than objective that we can develop a more effective investing strategy.”
“For most investors the far better approach is to wait for clarity in the form of technical patterns and trends rather than group for perfect timing along with the legions of serial bottom callers. Catching a turn exactly can be very gratifying until you consider how costly the process ultimately was.”
I don’t know about you, but that does nothing for me.