I Know Nothing About The Markets….Or Elvis

This post originally appeared on TraderPlanet.com.

Polls show that eight percent of Americans still think Elvis is alive. Thirty-three percent believe in UFO’s. Seventy-four percent feel that the U.S. government is covering up what really happened with the JFK assassination. And about ninety-five percent of the people at the seminar I was asked to speak at last weekend thought I knew nothing about the stock market.

In fact, not only did the majority of the audience NOT believe what I was saying, but many of them got aggressively angry with me.

“What do you mean the fundamentals don’t matter,” one shouted.

“I would never buy that stock. It’s at an all-time high,” grumbled another.

“Technical analysis is voodoo. Complete witchcraft,” a matronly type lady told me at the break.

I have a fantasy. A fantasy that if I explain how the markets work to people by using non-market examples, somehow I will be able to break through their preconceived ideas and dogmas and make them better traders and investors.

That these people will then be able to think for themselves in the markets, throwing aside the traditional mental crutches provided by analysts, fund managers, and the talking heads you find on every financial news channel.

This is something I have tirelessly worked at on my blog and although I have had encouraging feedback from readers over the last year, a story that broke this week reminds me of how large of a mountain I still have to climb.

Apple Call Spread Debacle

Fanboy and super-guru Andy Zaky’s Bullish Cross investment group was revealed to have lost all $10.6 million of its investor’s money on bullish Apple call spreads during the stock’s precipitous fall from its all-time high of $705.07 to the low $400’s. That would be bad enough by itself, but now it is estimated that followers of his Bullish Cross newsletter may have cumulatively lost over a billion dollars following his advice.

The average loss per subscriber is pegged at $2.6 million.

I have a hard time feeling empathy or pity for these people. They weren’t deceived a la Bernie Madoff or taken out by some rouge trader. No, they knowingly concentrated their money in a leveraged derivative and then stood by and watched it in real-time as it slowly became worthless. They took their dogmatically ignorant ideas and stuck their heads in the sand, instead of educating themselves about the markets from the people who work in them every day.

But still, I thought to myself, who are these people?

Who are these people that have probably worked hard all their lives and must have had at least a dash of intellect, insight, and common sense in order to amass a couple million dollars in cash? And yet, upon entering the world of the stock market turned into complete morons, ignoring every concept of risk management and personal responsibility they undoubtedly embraced in the rest of their lives.

And then I answered my own question…..they were the same people who were screaming at me.

Before I finished my talk, a middle-aged man stood up and threw me a challenge in the form of a question. He wanted to know what the most important thing was in order to become a successful trader or investor.

“An open exchange of ideas and information with others who participate in the markets,” I replied.

“Ah,” he said, waving his hand at me in the universal “what do you know” gesture, and with that he walked out.

I wanted to run after him. To tell him that if he was getting into the market with that attitude that he might lose everything. All the spoils from decades of hard work could be gone in a flash. That he could find himself in the position someday of telling his wife that “it was all gone.” And that it didn’t have to end this way. That he had the power to stop it and perhaps even prosper in the market.

But I didn’t. Instead I took a sip of water, composed myself, and tried my best to make a difference with at least five percent of the room.

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  • Chomen

    Nice piece, but you can’t compare UFO and Elvis nutcases with the solid, scholarly research done by certain JFK assassination researchers. Do a Google search for John Newman, Phillip Melanson or Jim DiEugenio. Read those books. Wake up.

    • After I read “Case Closed” by Posner there was nothing left for me to read about the JFK assassination.

  • txfa

    So “fundamentals don’t matter”, I will remember it and would remind you of it next time when you asked “why you never asked for real Cubans”, when was that.post. just 6 months ago? It may not be this year or next but we will see.
    By the way those who go after “leveraged derivative” investment never do that base on “fundamentals” and they deserve to lose it all.

  • Tim Bourquin

    I see this all the time at the Expos, Brian. Someone will come into a workshop room, listen for 60 seconds to see if the speaker is giving them the Holy Grail of risk-free millions, and walk out when it’s not delivered. They do this in every session for three days and are inevitably disappointed.

    • I have actually been thinking of putting together a seminar called “Everything You Know About The Markets Is Wrong.” Not sure it would go over well at the Money/Trader’s Expos though.

  • Larry Jordan

    What if I told you that I trounced the indices between 2008 and 2011 by relying on fundamental analysis, ignoring technical analysis, and never buying a stock at its 52-week high?

    We have different approaches, mine is right for me, and yours is right for you. I could learn a lot about technical analysis and trading from you, and you could learn a lot about fundamental analysis and investing from me.

    If you say,”fundamentals don’t matter,” without qualifying the statement, it makes no sense to someone with a different discipline or a longer time horizon who sees that they do matter.

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Brian C. Lund

Brian C. Lund

Great father. Good friend. Decent trader/writer. Lacking husband. Solid drummer. Sometimes funny. Often A-hole. Terrible poker player. Too smart. Punk rock. Work in an ice cream shop.

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