Words to Live By? (Part 2)

A few days ago, I heard a trader addressing a group.  By the tone of his voice and the superficial meaning of his words, this was certainly sage advice.  Today I will begin to lay the framework of critical thinking that should always be employed to evaluate what people say in financial circles [or anywhere else, perhaps].

The ultimate arbiter on all things right or wrong about financial markets is the profit/loss (PnL).  I can say whatever I want about this stock or that market, this pattern or that valuation, this metric or that performance statistic.  If I make money for myself or for others then I will stay in the game.  If I lose money then I will eventually go bust and you will hear me no more.

Unfortunately for those listening, you can never know what my true PnL is.  I can tell you that I’ve made hundreds of millions of dollars in stocks.  Will you believe me?  In an industry sometimes suspected of snake oil, chicanery, and egregious fraud driven by human greed, should you believe me?

If there’s any possible way that I might profit now or later from your belief then you probably should not believe me.

Mull that over for a couple days and I will continue to develop this thesis in my next post.