Buy the rumour and sell the news of the fundamental

Analysis – NEVER Give Up

QUESTION:

Hi Marty,

The unbelievable amounts of research you have done and the knowledge you impart on your blog is just amazing, and is what inspired me to start trying to analyse markets and make forecasts of my own. Your personal grasp of the big picture and the computer system you have subsequently designed to help with your calls is really a remarkable achievement, and although the mainstream press tend to ignore you it is obvious that your influence is profound, as we constantly hear your words from the mouths of the guests on Bloomberg, CNBC etc..

I am just a little guy with no real means to be able to construct a system such as your own, and I manage too small a portfolio to qualify to sign up for your services. I have to rely on a laptop, some charting software and the will to read almost constantly about markets. So I read your blog today and found your comment about people trying to combine a bit of fundamentals, TA, and cycle analysis, being snake oil salesmen.. I have to say I found it a bit dispiriting to say the least seeing as that is my only real avenue into forecasting at this time.

My question to you is what are we supposed to do? Give up and go home? If I am to leave it to the experts, how do I gain expertise?

Thanks

Ben

ANSWER: Absolutely not. My point was the lack of any consistency in fundamental analysis. That tends to be the real snake-oil salesmen’s tool for it can be very selective. this is what TV uses to sell advertisements. They need fundamentals and in that need they create problems. They always want to reduce a given event to a single cause. That ends up being delusional at best. Technical analysis that is NOT HARD ruled which depends purely on the eye of the beholder is the dangerous part and here too it is the human emotion that gets in the way.

What I try to do is bring the fundamentals of the world together so you can see the trend. The long-term trend is set in motion and cannot be changed no matter what we do. I can march on Washington an picket in from of the White House and all it will do is get me arrested for walking on the grass.

What I have come to understand has emerged from the school of hard knocks so to speak. I met with government around the world and even met with people managing the Swiss/Euro Peg. No matter how hard I have tried to help ease the crisis, I cannot. So the only solution was to give up and then try my best to help expose the truth for when in the middle of a crash and burn, then and only then, is the that brief shining instant where we have a chance to make a difference.

Technical analysis that I teach is RULE BASED. We use basic symmetry to produce constant results. But this is NOT a forecasting tool – it is a target OBJECTIVE tool. You cannot forecast based upon such methodologies for then you are into human interpretation. The good news, we now how the videos of technical analysis courses I use to teach. We are in the process of converting this to DVD.

When I wrote the Global Market Watch, which is a pattern recognition AI model, I allowed the computer to explore on its own and report back to me the results. This REQUIRED tons of data. It cannot be achieve on databases only back 50 years. You need hundreds of years so the computer can learn form every instance. It is calculating patterns with unbelievable complexity of variables.

All of this said, the key to any model is the UNDERSTANDING of its functionality. So what you are doing may not be able to achieve what our system does, but you are on the road to knowledge and that leads to CONFIDENCE in your decision.

When this model has made some of its most outstanding calls at the most extreme points in a panic, it is hard to retain that CONFIDENCE to do what it says. At the collapse of the markets in 1998, the New Yorker Magazine reported that I covered my shorts announcing that to our trading room and walked out and went to the beach. Some read that as arrogant or rejoicing I made more money than anyone in the shortest amount of time. In truth, it was discipline. It was knowing that my inner self was saying are your crazy? Over time, I came to realize when the computer would put out a forecast and it could make me say OMG is this crazy, it was 100% spot on. For if it could invoke that emotion within me, it must be devastating the majority in which case it was ripe for the change.

So NEVER give up on your quest to understand. That is what life is all about. Trying to use fundamentals to forecast is hopeless. A good trader uses them in the opposite manner – buy the rumour and sell the news of the fundamental. This model and watching how it functions has taught me a lot. Plus having clients everywhere has forced me to open my eyes and see the world through everyone’s perspective.