Phil Pearlman's Blog

The Rise of the Market Participant Editor in Finance Media

Monday, May 9, 2011

There’s a new breed of writers, though, who are taking advantage of more efficient publishing technologies such as StockTwits and WordPress in order to communicate actionable information directly to those who are also invested.

These guys are experienced market participants who focus squarely on making money. They hunt and have been hunted. They have tasted their own blood on their lips and they eat what they kill.

There’s a big difference between reporting the news and making money.

Traditionally, financial news journalists have focused on reporting the history and facts and putting new developments into context. This is where they excel and it is a critical function. But they are less proficient in analyzing the effects new information has on price.

There’s a new breed of editors, though, who are taking advantage of more efficient publishing technologies such as StockTwits and WordPress in order to communicate actionable information directly to those who are also invested.

These guys are experienced market participants who focus squarely on making money. They hunt and have been hunted. They have tasted their own blood on their lips and they eat what they kill.

The market participant editor puts his/her market opinions out there in real time for educational purposes but also to the scrutiny of readers many of which are also pros. They are perpetually being vetted and there is no net.

This is a beautiful thing because the best will gain an audience and gain the respect of their fellow investors and traders over time. Its also a huge win for readers because they now have access to more high quality actionable information

We have set out building platforms to facilitate the expression of these ideas in real time.

The collection of talent on our StockTwits Streams and those who we are collaborating with on the StockTwits Blog Network is already astounding and it is growing fast.

Amazon Web Hosting Problems Are Incredibly Bullish for the Cloud

Tuesday, April 26, 2011

Since Amazon’s ($AMZN) web hosting services went down early last Thursday morning, much cautionary ink has been spilled regarding the viability of the cloud. The news media loves to jump on a negative story in a hot area and amplify the dangers.

But Amazon’s now widely reported storage problems which left many web sites (and some popular ones) down is actually an incredibly bullish signpost for the cloud.

I can’t help but think back to the outages the old $AOL suffered in late 1996 as it shifted from metered connectivity to un-metered for a flat fee of $19.95 . Usage exploded and AOL was unable to handle the increase and suffered repeated outages and dial up busy signals.

Subsequent news reports ranged in focus from the viability of $AOL to the internet as a whole. Both were ridiculous as AOL went on to grow revenues and its stock price substantially for three years before the Time Warner debacle and well, you know, the internet is now a pretty big thing.

Closer to home and a bit later on but still prior to Y2K, there was a period in which every time Amazon.com or other e-commerce sites like $EBAY went down for even short periods, the media would jump all over the story and the stocks would sell off hard.

The down time at Amazon is more representative of a new and profound technology being applied in its early days. This is a period when the technology is not well understood, where the vast majority of infrastructure build and business is ahead and in which the media will blow every hiccup well out of proportion.

This Is So Cool

The Beastie Boys have just released their new album on SoundCloud. So cool.

The Beastie Boys have just dropped their new album on SoundCloud. So cool.

On their blog, they write,

Good people, unfortunately due to circumstances beyond our control, the “clean” version of our new album, The Hot Sauce Committee pt 2 has leaked. So as a hostile and retaliatory measure with great hubris we are making the full explicit aka filthy dirty nasty version available for streaming on our site. We hope this brings much happiness, hugs, and harmony. Enjoy Kikoos for life!

SoundCloud has built trust among artists where others have squandered it.
/Hot Sauce Committee Part Two by Beastie Boys

(hattip @fredwilson)

Market Shrinkology Mail Bag

Thursday, April 21, 2011

I received an email today from a trader who has been struggling to stick to his stop exit plan once he is in the trade even though it is well planned ahead of entry to the trade. His struggle is causing him significant anguish. This was my response:

hi xxxxxx,
this is my brutally honest response.
everything in the world that is worth succeeding at presents a momentous challenge.
in trading the challenge is the “mindfuck of death.”
i realize from your passage that you are aware of this on some level.
the question is not what advice i might give u but whether u are up for staring this challenge down, meeting it and exceeding.
this depends upon how much u want it and if u are willing to make the sacrifice of murdering your ego.
ultimately u will either do so and stick to your plan or you will not.
there is no secret exercise i have for u.
the choice is yours.
phil

Learning to Let Your Winners Run

Wednesday, April 13, 2011

Investors and traders often sell their winners too soon and leave money on the table. This is so common as people become excited once they have a winner and enjoy the feelings associated with realizing gains.

On last night’s Market Shrinkology program I reviewed the psychological causes of this tendency and outlined 4 things to focus on in order to help you let your winners run.

1. Position Sizing – If you are habitually selling winners too soon, you may want to trade smaller at least until you have mastered the discipline of letting them run.

2. Concrete Exit Plans – Once you enter a trade, your psychology changes as a result of either having a winner or loser. Rational decision making becomes more difficult. By establishing a concrete exit strategy before you enter a trade (and sticking to it), you will be better positioned to exit when the time is right and not when you are impelled by emotions.

3. Visualizing and Journaling Past Successes – Establishing a vivid memory of instances in which you were successful in letting a winner run provides a mental blue print for your actions once you are in the trade. Journaling the episode enhances your memory. If you have never successfully let a winner run, make one up or steal a story from someone who has.

4. Risk Management – Pairing a winning position or trading around it goes hand in hand with responsible risk management. Establishing portfolio rules around risk will help you maintain rational control once in a position and will also help you maximize winners.

For a much more in depth discussion on this topic, here’s the video from last night’s program:

The Courage of Outrageous Predictions

Tuesday, April 12, 2011

I have seen so many outrageous predictions in my day. The $DJIA is going to 36,000. The $DJIA is going to 3,600. $GLD is going to 5,000. $GLD is going to $500.

I especially note those which preface their outrageousness with claims of being outrageous – self consciously meta.

I have seen so many outrageous predictions in my day. The $DJIA is going to 36,000. The $DJIA is going to 3,600. $GLD is going to 5,000. $GLD is going to $500.

I especially note those which preface their outrageousness with claims of being outrageous – self consciously meta.

I read one the other day that went something like this,

“here’s an outrageous prediction, we’ve seen the highs of the year.”

That’s not really that outrageous. This guy is bearish. He could have just as easily have said, “I am bearish.”

There is a motivation to making outrageous predictions and it is usually a red flag.

Here’s how it works.

If I make an outrageous prediction or label a prediction outrageous and I am wrong, I respond to ciriticism like this:

“Well, I said it was an outrageous prediction.”

This discounts my responsibility for being wrong to some degree. But if I am right, I will say,

“look how brilliant I am. I made an outrageous prediction and it was dead on.”

Outrageous predictions are used to manage impressions. One defers responsibility if wrong and gloats incessantly if right.

It is a manipulative gambit.

Discussing Railroad Stocks and Commodities on CNN Money

Sunday, March 27, 2011

I sat in Friday afternoon with Paul La Monica and Todd Sullivan for an episode of BullHorn on CNNMoney.

We discussed rail stocks from value and technical perspectives as well as the continued increase in global commodities demand.

$UNP $CSX $GBX $NSC $NKE

Market Shrinkology: The Wisdom of Brett Steenbarger

Wednesday, March 23, 2011

Dr. Brett Steenbarger is the preeminent trader coach and a man I have immense respect for. He no longer actively updates his blog but the material there and in his books is invaluable to those who seek to improve their trading and are or want to become serious pros.

In this episode of Market Shrinkology, I review Dr. Brett’s work and also highlight some of his resources which are available online and through Amazon.

You can find his excellent blog here. Though he has not updated it in sometime, many of the posts are timeless and highly valuable.

The SP 500 Has Doubled Twice in 10 Years

Tuesday, March 8, 2011

The $SPX has doubled twice in ten years.

From 10/02 to 10/07, the index doubled from 768 to 1576. From 03/09 to 02/11, the index doubled again from 666 to 1344.

Still the $SPX is flat over the the past 12 years.

The $SPX has doubled twice in ten years.

From 10/02 to 10/07, the index doubled from 768 to 1576. From 03/09 to 02/11, the index doubled again from 666 to 1344.

Still the $SPX is flat over the the past 12 years.

As Maurice White never sang, “As we churn, so we burn.” …

StockTwits Spotlight: Peter L Brandt

Saturday, February 26, 2011

Today, I would like to highlight a guy who, three weeks ago, barely knew what social media was. Peter L Brand still doesnt know the finer points of user generated conent and it will likely take him a while to catch onto the subtelties.

But who cares. This guy is a seasoned and wildly successful trader who, it turns out, has a bit of an edge to him while also being absurdly generous with his research. You can find his Chart.ly stream here.

For a while now, we have thought of StockTwits as an organic farm system which uncovers incredible market talent and provides a platform for them to be heard by others obsessed with markets and who crave great ideas and quality analysis.

There are a ton of gifted market participants who have never appeared in the usual unreliable media sources and they are getting their word out one message at a time. This is my favorite part of the gig, connecting with experts in specific areas of finance and watching them grow relationships and a following. It is profound.

Today, I would like to highlight a guy who, three weeks ago, barely knew what social media was. Peter L Brandt still doesn’t know the finer points of user generated content and it will likely take him a while to catch onto the subtleties.

This morning, Peter sent me his weekend report and informed me that he has been publishing these since 1980 and distributing them to a small group of friends, first via snail mail, then via fax and then via email. He has recently published a book entitled Diary of a Professional Commodity Trader. I’ve just finished it and it is a silly good read for all traders who crave a sense of time perspective, discipline and reality.

It is now my mission to get the word out!

Please welcome Peter to the community. Embedded below is a copy of the Factor Status Report for February 28, 2011 that he sent to me in the email:

(Hattip to Kevin Commins who introduced me to Peter!)

Factor Status Report, Ferbruary 28, 2011

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