Question:Hello zl,
I listen to a lot of market talks on business channels and this actually was said … gold and oil was going to zero in 2010. Now I said, “What, who, where is this coming from?” But I thought the same when oil traded at $145 per barrel and pundits said that oil was going back to $35 in 2009.
......... from Shell Shock Slipville
Answer:
Hi SSS,
As the saying goes, even a broken clock is right two times per day. And so it goes for financial punditry, even pundits will be right at least 50% of the time when predicting whether a market will go up or down. Predicting with detail, such as the price of oil or gold, drops the odds of being correct considerably.
Of all the things I have learned since I became a student of the markets, the most amazing and disheartening is that financial pundits, those highly educated, highly trained “experts”, do their thing in a world fueled with irrationality.
Of all the things I have learned since I became a student of the markets, the most amazing and disheartening is that financial pundits, those highly educated, highly trained “experts”, do their thing in a world fueled with irrationality.
It is not that the financial experts don’t know markets, economic theory, business theory, or trading; clearly, they understand all of this. The problem comes
when they try to predict market movement and market price precisely.
when they try to predict market movement and market price precisely. This is problematic because markets represent the collective consciousness of all its participants (and there are millions upon millions of us), which means markets simply reflect the irrationality of humans in the midst of emotional flow, specifically the flow of greed and fear.
Either of these two emotions can flip market movement in an instant, or cause the price of a market to rise or drop inexplicably - usually without a hint or a clue. What warning?
Market movement and market price exhibit the same characteristics of water flowing, fluidity and balance.
Market movement and market price exhibit the same characteristics of water flowing, fluidity and balance.
Markets are like flowing water in that they deflect and move in a new direction when meeting an object ( in almost every case, support or resistance ), but eventually they find their level and settle. Sometimes pundits will see the object in front of the market flow and sometimes they won’t. The real issue, however, is predicting which way most of the water (markets) will go when meeting an object. Studying a patch of ground where water flows will help you understand the flow, and if all things remain equal, you could eventually predict with (some) accuracy which way most of the water will flow when meeting an object. 
The problem, just like the markets, is that if anything changes on that patch of ground, the water flow will change. Thus, our 24/7 news cycle funneled through an instantaneous and ubiquitous Internet creates a number of “objects” on a daily basis. Think about it …As to oil and gold going to zero in 2010 … Whichever pundit predicted that has obviously not studied the patch of ground upon which the water flows. If gold and oil go to zero in 2010, predictions, markets, and money won’t matter as the flow of water will have become a tsunami, and we all will be washed away.
Trade in the day; invest in your life …....
Regards,
ZL
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