“If you have to forecast, forecast often.”
–Edgar R. Fiedler
As the bull market rolls into its eighth year the number of market pundits proclaiming that a major top is about to occur has been growing steadily. Recently, several prominent hedge fund managers, including Ray Dalio and Howard Marks, have been warning that the end is near. These are not folks who tend to make constant market direction calls, so they understandably are taken more seriously than most stock pundits.
In the world of stock market punditry, you really don’t need to be a very good investor or trader such as Dalio or Marks. You can do a lousy job of making money and it won’t matter as long as you know how to attract media attention. It never hurts to make a good call, but when it comes to stock market gurus, success is measured by the eyeballs you attract and not the accuracy of your predictions.
The essential steps to being a stock market guru are as follows:
- Be dramatic. In order to attract attention, you must make big, bold calls. It doesn’t matter whether you are right or whether it is actionable or helpful. You need to find ways to gain interviews and exposure and you do that by giving the folks in the news media something eye-catching that they can use in a headline. Big target prices and talk about once-in-a-lifetime events are always a good approach
- Once you make a big prediction, keep repeating it. Find whatever data you can to back up your arguments and express confidence that you are right and how it is just a matter of time before your prediction will be proven to be correct. Don’t change your mind or express any doubt. The media doesn’t like equivocation. They want certainty and strong opinions because that is what sells.
- Ignore entry points. One of the key elements of being a good guru is that you make it impossible for anyone to track your actual performance. There is no way to be wrong if no one knows your entry point. Timing is the enemy of the guru, so you need to find a way to make sure it isn’t an important issue.
In the case of a particularly bad call, you can claim to have taken a stop and then you can re-enter. When you do take a loss, the loss is always small. The important thing is that you don’t admit to being wrong. You just are managing the trade that is sure to work very well. In the real world, it is accurate timing that makes investors and traders the big money, but in the world of stock market gurus timing is deadly and you can’t afford to be too precise with predictions.
- Don’t be modest. When a trade moves in your direction, make sure you proclaim victory loudly and often. It doesn’t matter that you still may be in a losing position from your initial call. Because no one can keep track of your entry points you still can be wildly successful when there is any movement in the right direction. You may not make actual money, but that it isn’t important to a guru.
- Create the impression you are always in the best stocks. One trick of many good gurus is merely to talk about stocks that have made big moves and create the impression that they own it without actually saying so. There are a number of prominent posters on Twitter who do this extremely well. They will note that ABC is up 20% and make sure they create the impression that they caught the trade perfectly. They don’t outright lie, but they do a nice job of misleading.
- Pretend to be modest. It is important that you don’t come off as too arrogant. Even the most gullible followers will not believe that you never make mistakes, so every once in a while you need to admit to some bad calls. The important thing to remember is that all losses are minor and that you are hedged so you can’t possibly lose any money. Unlike real traders, the guru never has losing streaks. He just reels off a series of fantastic calls.
The important thing to remember is that being a stock market guru has little to do with being a good investor or trader. The skill sets can overlap, but stock market gurus are more entertainers than teachers.
Those faux experts can be helpful to real market pros as they illustrate the mental and emotional games that we play in the market. Real traders are humbled by the market constantly and they know that is part of the game. The fake gurus always are focused on projecting an image that is at odds with the reality of actually trading or investing in the stock market.