10 Answers To The Biggest Market Questions

As part of my continuing commitment to public service, here are the answers to the biggest questions about the markets. You can finally stop asking them.

  1. Why did the market do X? There are so many participants in the market, someone probably bought or sold today because their favorite popsicle was out of stock at the grocery store. Whatever reason you can invent, someone somewhere probably acted on it. The result of all that foolishness is the market price. Thus, the real answer to “Why?” is always the same: All of the above. A useless answer to a pointless question.
  2. Are the markets rigged/manipulated? Of course they are. Face it, if you don’t think you know something the other guy doesn’t, you shouldn’t make a trade. Don’t act surprised that everyone else tries to gain an advantage too. But until some legislator passes a bill that requires you to invest, your participation is voluntary. Figure out a way to deal with “unfair” markets, or take your ball and go home.
  3. Don’t I have to be in stocks to be able to retire comfortably? No, you need to save money in order to retire comfortably. What you do with it after you save it isn’t that important. When your costs decrease, the options you have in life increase. You become more free. People die to be more free, while you fritter your freedom away buying $5 cups of coffee, a McMansion, and a mid-life-crisis-mobile. Making up for that is what requires taking bigger risks.
  4. Is there a secret to success in the market? Yes, stop looking for a secret. One of the things that makes the markets so fascinating is that investing can be as hard as you want to make it. Like a Chinese finger trap, if you stop trying so hard it’s easier to succeed. Being simple doesn’t mean a strategy can’t work. Simple is often the hardest thing to do, so it will continue to work because few people will actually do it. It’s so much more fun to keep tinkering until you achieve a Rube Goldberg level of complexity and then sell it to some sucker, probably in local government.
  5. How can I turn $10 into one billion dollars? There are three ways: 1) Become a central bank 2) Use a magic marker, a lot of confidence, and a winning smile 3) Become immortal and avoid currency collapses. The second method is probably the most achievable.
  6. What will the market do (tomorrow, next week, next year)? Trying to predict the future is almost as foolish as thinking anyone who could would give you an honest answer to the question. Based on my proprietary indicators and years of research, I can guarantee that over any period of time the market will do one of only four things: Go up, go down, do nothing, or be closed. Be prepared for any of those events to occur at random and find a way to make money in all of them.
  7. Should I become a full-time trader? If you have to ask, then the answer is no. When you’re ready to be a full-time trader, you will take a vacation from work and one year later realize you never went back. When you have tough times, getting a job again won’t be something you consider. It’s like masturbation: You know when you’re ready and don’t need to ask someone else if you should.
  8. Which is better, fundamental or technical analysis? Both. All value is subjective so no truly objective measurement of it is possible. Fundamental analysis ensures you will eventually have a number of similarly deceived fools on board your ship, while technical analysis tells you what the rest of the fleet of fools is doing.
  9. Why should I believe what you say? Because you are a self-selected sample. You have no idea what to do, otherwise you would never click on a headline like the one I used. More importantly, I can help rationalize your decisions, while flipping coins can’t.
  10. ___________? The markets, like life, are full of disappointment. I’ve omitted the tenth question to allow you to hone your coping skills.

3 thoughts on “10 Answers To The Biggest Market Questions

  1. Pingback: Wednesday links: convex strategies | Abnormal Returns

  2. Ironically, I’m not so much looking for guidance as I am interested in how other people think about the basics… always adjusting the world view. I’m not a trader, and as I’m mostly in a 401K it’s all about asset allocation for me. My best decisions have been from simply listening to the chatter (a lot easier with the internet) and then honing in on commentary on areas of interest. I pull in the opinions and data and synthesize it, and I never go all or nothing. It’s usually not too hard to figure out who is putting all their eggs in one basket, or just repeating cw, and those are the opinions I avoid. FWIW i agree with every comment, even #3, but I think you overstate the case a bit on that one. However, your point is correct, you can’t rely on stock returns to make you rich (but I do need stock-like returns to hit my retirement goals on time… roughly 8% annually would be just fine, and I’ve done 9% wtd avg the past 3 years which is only to point out that even in this period of ‘low returns’ there are abundant opportunities.

  3. Pingback: Linkfest:16 August, 2012 | Alpha Ideas

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