Caught this great chart from Steve Burns (via Business Insider):
Not needed for trend following.
Read the FAQs.
Do you buy and hold Bitcoin? For those who have held on through the turbulence it has turned out well–so far. Michael reads a lively blog post from a few years back regarding the right way to trade, the wrong way to trade and all the emotions people feel in-between. Michael breaks the post apart with commentary.
Charles Faulkner is back on the podcast today. Faulkner is an author, trader, and international expert on modeling the knowledge and performance of exceptional individuals. He was originally featured in “The New Market Wizards” by Jack Schwager. Faulkner has had one of the most popular podcasts on Trend Following Radio. His new work is centered on deciphering the complicated from the complex.
Warren Buffett recently said, “In terms of crypto currencies, generally, I can say with almost certainty that they will come to a bad ending. When it happens or how or anything else, I don’t know.” What does Faulkner make of Buffett’s prediction?
With all this new technology and language most will turn to others for advice. Unfortunately, there are a lot of fortune tellers pushing agendas. The idea of forecasting is to make people move. It is a way of getting people into action and doing things they would never do if they knew the truth. “Why can’t the magical thinkers be accurate?” Charles points out that unfortunately fortune tellers will be right some of the time and “reasoning by resemblance” is a common fallback trap for people.
How should you go about navigating this complexity? Complex and complicated are two very different things and the ability to identify what situation you are in requires a high level of thinking. Complicated situations or problems can be solved by asking a knowledgeable person for advice, reading a book, watching a YouTube video, etc. Complex scenarios take trial and error.
Still not sure if something is complicated or complex? Uncertainty is one quality of complex systems. It has non-linear causes and effects. Some little action can have huge ramifications. In the same way, it takes huge amounts of effort and money to change complex situations, for example: healthcare, opioids epidemic, etc. People frequently think that if they just have more information, different information or a smarter “guy” that they would be better off. Unfortunately, when you are in a complex situation, standard rules don’t apply.
“Markets need ambiguity and uncertainty to be the living system that it is.” – Charles Faulkner
“Scientific discovery is an assault on commonsense.” – Charles Faulkner
I just listened to 624 the edge. I did enjoy it but like the 626 interview lots better as I have read a lot of information about those people. I got my CFP in 1989 but sure wish I had gotten my CMT in place of that. I use Dorsey Wright point and figure in the work I do. Also IBD and Stock Charts.com.
Glad you like them.
There are 600+ eps… all one grand experiment!
Some you might like better, sure. But I bet they all offer a pearl here or there.
Food for thought:
Cognitive dissonance is everywhere. Michael quotes from an article by Alwyn Lau titled “Quick to Attack and Condemn: Why We do It.” Trumps presidency has produced arguably the greatest case of cognitive dissonance in history.
Many cognitive dissonance with the markets. What is the best way to counter cognitive dissonance? Take a minute, stop, and look for an alternative explanation. Stop hallucinating and start studying. Read perspectives from both sides and educate yourself.
Staying attached to news and breaking headlines only feeds the problem. Are you in cognitive dissonance about markets? Politics? Have you given yourself a back test?
“The more certain you are of a perspective, the more severe your dissonance or mental torture will be when something threatens that perspective.” – Alwyn Lau