Why You Shouldn’t Trust My Analysis

I put a lot of time and effort into the stock analysis I provide on this site and in my book, so why shouldn’t you trust me? Of course, I believe you should trust me, and I have provided plenty of evidence as to why you should, including this graph, a version of which can be seen on the cover of my book:


They say a picture is worth 1,000 words, so I’ll let this graph comparing my returns from 2008-2014 to the returns of the Dow Jones Industrial Average speak for itself.

But what’s with the headline of this post? It’s not that I don’t believe you should trust my personal analysis, it’s that I don’t think it’s a good idea for any trader to blindly trust anyone’s analysis. Most stock analysts believe they know what they are talking about. For example, I assume Adam Zaky thought he knew what he was doing. I include an entire chapter in my book about the common misconceptions many traders have about so-called stock “experts.” Here’s an except:

…the biggest problem with TV [analysts], in my opinion, is that there is very little accountability for the “experts.” Sure, the anchors might call some of the guests out for being wrong on a trade, but people are bad at assessing trends based on a single data point at a time. In baseball, I can tell how good a hitter is because as soon as he steps to the plate his batting average is displayed on the screen. A .270 batting average tells me that he gets a hit 27% of the time. So why don’t the guests on CNBC have batting averages? If the host calls out an expert on an incorrect pick, it is easy for the viewer to think, “Oh, he got one wrong. Everybody makes mistakes. He is a TV stock expert, so I’m sure it was just a fluke.” But if I see that the “expert” has a stock batting average of .270, I might not be so inclined to listen to him or her when he or she is only right 27% of the time! Unfortunately, the TV channels do no such thing. Remember, CNBC wants viewers to believe that they need to watch their network to gain insight on their investments. If the insight comes from an expert that is only correct 27% of the time, the viewers will think that watching CNBC is a waste of time.

              The issue of accountability brings me to another point: if talking heads on CNBC can be wrong half of the time, what are the qualifications to be a stock picker on television? Well, certainly you need to be entertaining. You need to be good at communicating. It would probably help if you were attractive and confident. Are you starting to see the picture? Of course, you need to have some type of credibility, such as a degree from a good school and/or a job on Wall Street. But most of the people responsible for the financial crisis in 2008 had degrees from good schools and jobs on Wall Street! Unfortunately, just because you have a job on Wall Street does not mean you are good at your job. Just ask Bear Stearns shareholders if a big office and a big salary make you a good investment banker… My point is that there are a lot of highly-skilled, highly successful people out there offering advice to others about the stock market, both for free and at a high price. However, there are also plenty of people who have absolutely no idea what they are doing who present and carry themselves with such misplaced bravado that it is hard for even Wall Street insiders to recognize them…

Blindly following anyone’s advice without critically assessing its validity is never a good idea, whether it be in the stock market or in a used car lot. If this is how you lead your life, you should consider yourself lucky that you are not already a cult member, and you should also immediately buy 20 copies of my book. Don’t ask why you would need 20 copies of an ebook. Just trust me. Don’t you trust me?

Unfortunately, it can be very hard to tell which “experts” know what they are talking about and which ones are clueless. However, once I learned to look at the opinions of analysts from the correct perspective, I was able to distinguish useful from useless and entertainment from excellence.

The chapter on “The Experts” comes attached to the rest of my book, but the good news is that the other chapters of the book are filled with useful information as well. Or maybe you just want to be able to look sophisticated in front of your coworkers when they ask you what you are reading on your Kindle, and you’d prefer to tell them “Oh, I’m just reading a book about stock market analysis,” rather than the usual “Oh, I’m just looking at pics of my ex-girlfriend on Facebook.” For these reasons and more, check out my book, Beating Wall Street with Common SenseI don’t have a degree in finance; I have a degree in neuroscience. You don’t have to predict what stocks will do if you can predict what traders will do and be one step ahead of them. I made a 400% return in the stock market over five years using only basic principles of psychology and common sense. Beating Wall Street with Common Sense is now available on Amazon, and tradingcommonsense.com is always available on your local internet!