Stop watching for noisesPosted on November 20, 2013
Some investors think that watching the markets is vital. We think more often mis-understood. The key reason is that people often end up reading, and trading on, the wrong information. Surely all information is worth looking at? Sadly, a lot of market information and posts is sheer and utter guesses. That’s right, it’s just made up. Reading it actually makes you dumber in our opinion.
Here is an example I’ve found just today for this post. I could have found hundreds.
“Oil rises on stimulus hopes” http://www.cnbc.com/id/101212557
Think about this like a scientist. How do they really know what each oil trader was doing, deep in their heart? Why each trader did the trades they did?
Ask one or many?
In option a) they call one or two oil contacts and ask them “what do you think was going on today” or option b) where they call each and every individual trader participating in the market and ask them why they executed each and every trade they did.
Of course option: a) since no-one has the time or resources to do; b)But how in the hell does any one trader know what everyone else is thinking? Are they God? Clearly not. So it is just a guess. It appeals to the narrative fallacy that we all succumb. People also want “the latest news” which for some becomes a constant need. People want to buy this stuff so the news wires produce it. Those headlines are just nonsense though.
How can you be sure it’s made up?
Because they told me,for example earlier this year we caught up with an old financial journalist friend for coffee in Beijing. To protect him/her we can only give you a list of Bloomberg/WSJ/Reuters/AP. I asked them how did they know that the US market fell on profit taking or that AUD was up due to concerns China’s reform program? He said they needed to produce content. All the time, several stories a day, often little bit-sized pieces. They would have friends in the industry to come up with a reason. It didn’t matter what, as long as it “was from industry”. Industry only cared as long as they were quoted by name to help build their profile. Quotes like “Jack from Zeus management in a team responsible for $10 billion thought that…”
How much accuracy was there to currency reports? “I have no idea, not very much”. Industry actually prefers to give quotes about recent market move intentions, because they are ultimately unprovable, one way or another.
So stop wasting your time reading the newswires and following the latest scroll bar on Bloomberg TV or CNBC. There is a reason that we don’t have a TV screen in the office. It’s just a distraction from the real information, which is out there buried, waiting to be dug up, analyzed and revealed. Real information like profits, assets and sales. The filings of company’s balance sheets and income statements. Picking out the real facts from the noise is tiring, but vital.
But why oil fell by 0.3% or the Dow rose by 0.2%? Couldn’t matter less. It’s just noise to tune out.
About Caterer Goodman Partners
Caterer Goodman Partners is a Shanghai based wealth management firm established with a clear vision to provide a new level of personalized financial planning services for expatriates in Asia. Our financial advisors provide guidance for our clients in all areas of investment, specialising in managed accounts, money-market funds, retirement planning and alternative investments. At Caterer Goodman Partners, we offer our advice and experience to provide low cost, tax-effective and simple solutions to match our clients’ interests.
About Owen Caterer
Since graduation Mr Owen Caterer has worked with the Queensland Premier's Department in Trade Facilitation and then as a financial adviser in Shanghai from 2005 until 2010. He then rose to Senior Adviser, then Business Development manager and then to Chief Investment Officer responsible for portfolios to a value of US$280 million across Asia. Following that Mr Caterer left to found his own firm with a partner in the financial advisory and wealth management area. This focused on developing China and Asia's first fee-based financial advisory (rather than commission-based). This has grown to now have 8 staff and and managing almost US$35 million for clients throughout Asia. This business success was recognized as a finalist in the 2013 ACBA in the Start Up Enterprises category and are one of a small number of foreign managed firms to have a full asset management license in China. Owen has also been active in the community volunteering for the Australian Chamber of Commerce in Shanghai and acting as the Vice-Chair of the Small Business Working Group (2012-2014) and as the Co-Deputy Chair of the Financial Services since 2013 until the present. They have continued to grow their business and have now been selected as a small group of companies who are platinum members of the Australian chamber of commerce. The achievement they are most proud of is their efforts to reform the financial planning industry in China and push it away from a hard-sales commission driven model to a more ethical management fee and long term customer service model. Owen has a Graduate Diploma of Applied Finance from the Securities Institute of Australia of which he was a member as a Fellow of Finance for many years and also has an undergraduate degree from Griffith University in International Business. Owen's interests are tennis, running and his wife and two children. He speaks fluent Chinese, first arriving in China in 1997.
Tags: 2013, Advice, Caterer Goodman, China, China Expat, China Expat Money, Finance, Financial Advisor, Owen, Owen Caterer, Shanghai
Categorised in: Economic Commentary