Saturday, October 16, 2010

Thinking

I always have to laugh after publishing any article that even touches upon politics. It doesn't matter what I write, I know there will be attacks and some of them strike me as hilarious. The reason I think they are so funny is that many of the attacks clearly are made without thought or reason and are simply knee jerk emotional reactions because there is a perception that my political opinions differ from the attackers.

As an example, one subscriber branded me as not credible because he believed that my political opinions were different from his. While we may not hold the same political opinions, that certainly doesn't mean that I should not be believed when I write about the markets and some of those qualities that I think can help people become better traders. I write about those qualities because they have worked for me and generally are unrelated to political opinions. If I am of a different political persuasion does that mean that I should not be believed when I write about managing risk or incorporating an exit strategy into one's trading plan, or for that matter suggesting that a trader should have a plan?

Another "contributor" wrote that I should not ever write about politics because I know nothing about the subject. Perhaps he is right, but I do hold a degree in political science from an Ivy League university, I have run for, been elected to, and served in public office, and I have authored legislation. This same brilliant critic pointed out that the fed is not part of government. I should note that the fed was created by an act of Congress and that the Board of Governors are appointees of the President. Though certainly not one of the three branches of government as set out in the Constitution, the fed is independent within the government simply because its actions do not have to be ratified by the President or legislature, but it indeed has governing power in its regulatory and supervisory functions. Wikipedia, Federal Reserve System, illuminates these functions as follows: "Its duties today, according to official Federal Reserve documentation, are to conduct the nation's monetary policy, supervise and regulate banking institutions, maintain the stability of the financial system and provide financial services to depository institutions, the U.S. government, and foreign official institutions."

Yet another blogger confessed that these free articles of mine that he reads have been informative to him and he intends to keep reading them, but he made sure I understood he would not buy my books because we differed politically. As I interpret that, he is unwilling to advance his knowledge in the trading arena with the purchase of a book because he doesn't like what he thinks my views are in a much different arena. That seems to suggest he will only read trading books authored by those of his same political persuasion. I'm guessing they will be hard to find.

I point out these examples because they all seem to have one thing in common -- lack of thought. The conclusion each reached was based on a perceived political difference that had absolutely nothing to do with the point of my article which was that covert manipulation of the stock market, no matter by whom, is not a good thing for the market IN MY OPINION. What concerns me is any covert manipulation of the market. It destroys the integrity. It results in a playing field that is not level. That is why the government has laws forbidding it. That, in my opinion, is why neither individuals nor corporations nor government should engage in or be permitted to engage in covert market manipulation. Of course the fed necessarily manipulates the market by some of its actions and it is designed to do that but it is designed to do it openly. A change in interest rates, one of the functions of the fed, can certainly manipulate the markets. The markets await fed announcements with baited breath and often move rapidly and sharply based upon such announcements. I have no quarrel with that activity. It is an appropriate function of government.

Last weekend I wrote of the importance of taking action to study and to learn about trading before trading real money. Based on the bloggers to whom I referred earlier in this piece I need to add that the action need be motivated and preceded by thought not emotion. If we are going to succeed in trading, I believe we need to think before we act. Emotional reactivity rarely makes for good trading. We need to formulate a plan and test that plan by practicing before putting real money at risk. We need to know what we are doing in the sense that study must be undertaken, the importance of money management in trading must be understood, an exit strategy should be incorporated in every trade, and an understanding of reward to risk and how it is determined must be grasped. Thinking before acting is critically important in trading as in life. Those who fail to think before acting seldom do well in the markets.

by Bill Kraft, Editor
Copyright 2010, Makin' Hay, Inc.
All Rights Reserved


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To comment on Bill's article click on the "comments" link below.

20 comments:

Anonymous said...

Bill,
Your article reminded me of the old truth "you cant please all the people-all the time." If they want to be foolish enough to pass on your material,they only hurt themselves.I think your books are some of the best in my personal library of Investing information. Keep up the great insights and we can move on once this election is behind us.

King Ralph said...

Pay no heed to those fools. Just send them a bill (pardon the pun).

Anonymous said...

Those people are fools and hypocrites, Bill. I have been sifting through dozens of financial newsletters (both paid and free) for years and you offer some of the most straightforward and genuinely honest and helpful advice of any of them.
Keep up the good work!

TheeSeer said...

Bill,
With your experience you should know that the general level of education and sophistication in the general public is abysmal. The government antics you mentioned are closely followed on the zero hedge website and are widely known in the industry. The fed has been supporting this market and Alan Greenspan let the "cat out of the bag" when he was recently interviewed and declared that the public could not stand both a crash in the housing industry and the stock market where their IRA's and 401K's are parked. The thin volume was the trigger and the steady exit of funds required the Fed to step in as part of their overall plan to draw the "herd" back in. Of course that stinks!but it may work in the short term. Longer term the actual bankrupt condition of all major banks using GAAP principles should and may yet completely tank the the Market.

Anonymous said...

On a daily basis, I read blogs, books, and periodicals to learn more about stock and options trading from experts in the field. I also read a lot to learn from experts on various political subjects such as taxes, elections, first and second amendment rights issues, economics, and liberty. Though with a bit less frequency, I even read about gardening. While any of these subjects might overlap on occasion, I don't read articles on free markets to find out when to plant squash and I don't read articles on composting to find the best strikes to trade on GLD. And most especially, I don't read any of these topics to see the author defensively react to criticism about his off topic positions.

one10soldier said...

When I see so many of the basic concepts circumvented at will by one set or the other in charge, the reason I don't lose any respect for the one's in charge is it's almost all already gone. I think we're soon to swing back to the 'lesser of two evils' soon and Lord know's I'm ready. Now to see what happens in the meantime because with them much more than us power of this magnitude is a big big deal.

AlwaysSee said...

What is truly notable about your articles Bill is your candor and openness. You don't attempt to be PC, but you tell it like it is through your educated opinion and experience. Your explanation of the various types of market manipulation that is possible was brilliant and a subject others refuse to talk about or even realize. I've realized this as it's occurance has been increasing now for several years and had never heard it explained so matter of factly as you did. Great job!

Anonymous said...

Bill, I believe I'm one of those you mentioned in the article today. I'm not a trader. Most of my investments are in real-estate, a field I learned while working as a carpenter. I'm a small investor and I'm reading about trading, not activly doing it.m When I know more I'll decide if it's for me or not.

But I'm really opposed to people who spread rumors. Even when they say it's a rumor they have a reason for passing it on. That rumor must have been part of your agenda. I've been reading your post for months because yu make sense. But my time, like my money, is limited. If I'm reading something I'm devoting my time and attention to what that person has to say. I don't have time for rumors.

And if I spend $20 or $30 for a book that's just the begining of my investment. If the book is worth what I pay for it I'll spend 10 or 20 hours reading it, studying it. I don't have that much time to devote to reading so I'm carefull and hoard my time, reading the best I can find.

And I'll say it again, I just don't like rumors. I probably get interupted a couple times every day by somebody cold calling from a broker I've never heard of, and each of them has a rumor that will make me money.

I like your writing and I usually like your content. I didn't like it when you started repeting rumors. I told you that then and I'm repeting it now.

Grant Johnston, Chico, CA

Vadim said...

Making professional approach dependent on the personality of the professional is political correctness by definition, which at this point is allegedly the biggest plague of this country, and the biggest mental obstacle to moving ahead. I don't like your political views, so I won't buy your professional book. I don't like personal view of Helen Thomas on the conflict between Israel and Palestine, so she can't be good journalist for CNN. My willingness to vote for the presidential candidate is influenced by his religious affiliation and by quality of his family, as if that might have 0.1% impact on his political abilities. I do care who is the boyfriend of my favorite singer, as if that might have 0.1% impact on her voice. And so forth.

The problem is not even in the fact that all this becomes important, but in the fact that what's really important becomes not.

Bill Kraft, MarketFN.com said...

Thanks, Anonymous. You are so right about trying to please all the people. I just wonder why they keep reading if they are so offended by the article or articles.
Bill Kraft

Bill Kraft, MarketFN.com said...

Right on King Ralph.
Bill Kraft

Bill Kraft, MarketFN.com said...
This comment has been removed by the author.
Bill Kraft, MarketFN.com said...

Thanks, TheeSeer, for your comments.
Bill Kraft

Bill Kraft, MarketFN.com said...

For the writer planting squash, you have an easy solution.
Bill Kraft

Bill Kraft, MarketFN.com said...

I get it, one10soldier. Thanks for writing.
Bill Kraft

Bill Kraft, MarketFN.com said...

Thank you Always See. I appreciate your comments.
Bill Kraft

Bill Kraft, MarketFN.com said...

Well, Grant, I'm not crazy about rumors either, but anyone who has been involved in trading the markets knows without a doubt that much market movement is triggered by rumors so like it or not if one is going to trade, rumors are going to be a part of your life. Maybe that might lead you away from trading but it is the way it is. As far as my books, it really makes no difference to me whether you buy one or not. I do think they have been helpful to many, but they may not be for you. As it turns out, it seems pretty clear now that the rumor I identified is fact. How are those real estate investments doing? I have a few myself.
Bill Kraft

Bill Kraft, MarketFN.com said...

It's OK to be wrong, Vadim. Thanks for writing.
Bill Kraft

Anonymous said...

Just a quick response. As soon as one ventures into the realm of political opinion, credibility becomes an issue, because it is such an emotion-driven area. You have only to glance at the comment sections of most news/politics articles, if you are inclined to waste your time doing so, to see how divisive a subject it is. And yes, both(or all three?) sides of the issues are driven by passion and emotion, and are loaded up with irrational, unsubstantiated claims. This, of course, runs counter to the clear-headed, rational thinking required to successfully navigate the world of investing.
I too was somewhat put off by the political slant in one of your emails, and I wondered how many readers would have the same reaction. I am not surprised to see that you received negative responses. To be honest, I think it hurts your mission, rather than helps it. Regardless of political affiliation, we are surely better off when people from all political walks of life are doing well financially, don't you think? Aside from that, keep up the good work!
Steve

Bill Kraft, MarketFN.com said...

Thanks, Steve, in general, I do agree. However, the article that stirred up the controversy dealt with market manipulation, not with politics directly. Subsequent information has proven the truth of the question asked about market manipulation. As you suggest, my mission as you call it is to try to educate regarding the markets. First, the markets do move on rumor, and I identified what then was rumor. Second, markets do move in response to politics so it is an ostrich approach to pretend politics has no bearing. Of course, you are correct that it is better when people are generally better off financially, but right now many definitely are not and I don't see how covert market manipulation will help them. Lastly, the great negative outpouring from those with free subscriptions amounted to less than .00015 of the overall readership. For those offended because I have a political view, there is a very easy solution, i.e. cancel the subscription and/or don't read the articles. Again, Steve, I appreciate your thoughtful commentary.
Bill Kraft