Monday, June 13, 2011

Investment Advice from George Carlin

Don’t confuse causation with correlation.
“Death is caused by swallowing small amounts of saliva over a long period of time.” ~ George Carlin
If you look hard enough for patterns and correlations, for better or worse, you’ll find them.  However a correlation should not be confused with causation. The winner of the Super Bowl, for example, does not cause a movement in stock prices.
Don’t try to outsmart the investor herd.
“Think of how stupid the average person is, and realize half of them are stupider than that.” ~ George Carlin
This wisdom extends upon the immediately preceding point.  While Mr. Carlin would advise not to confuse causation with correlation, his angle is that many people do confuse them.  There are just enough idiots that believe a Super Bowl win from the old National Football League is positive for the stock market and, as a result, they will buy stocks, hence causing a movement in stock prices.  No matter how much fundamental analysis you do, the psychology (and irrationality) of the herd can make all of your diligent and intellectual analysis useless in an instant.
Try not to live in a hypothetical world.
“What if there were no hypothetical questions?” ~ George Carlin
Most headlines in financial media are posed in the form of a question that no prudent person will spend significant time trying to answer.  Is the Bull Market Over?  Is This a Correction or the Beginning of a New Bear Market?  Should You Buy Gold Now?   Just remember that these questions are designed to get you to read the underlying article and that the media does not exist to provide useful information; it exists to sell advertising.  To accomplish this end, media sources must successfully distract you long enough to read their attractive hypotheticals.
Have a healthy perspective—your own.
“Some people see the glass half full. Others see it half empty.
I see a glass that’s twice as big as it needs to be.” ~ George Carlin
Similarly, and to quote legendary trader Jesse Livermore, “There is only one side to the stock market; and it is not the bull side or the bear side, but the right side.”  Stop arguing your philosophical position with others and place investment trades according to your own position—one that is not easily influenced by preconceived notions or biases.
Don’t take things too seriously.
“People who see life as anything more than pure entertainment are missing the point.” ~ George Carlin
It’s easier (and healthier) to laugh at the idiots in Washington, on Wall Street and in the Federal Reserve than to curse them in the comments section of blogs.  However, if cursing them entertains you, then please proceed to do so…

No comments:

Lunch is for wimps

Lunch is for wimps
It's not a question of enough, pal. It's a zero sum game, somebody wins, somebody loses. Money itself isn't lost or made, it's simply transferred from one perception to another.