Conflicts of Opinions

A year before, A came on TV and said “Gold can touch 1400-2000”.

Reporter asked B for his reaction on A’s statement. B said “It is stupid (utter nonsense) to think of gold touching 1400-2000”.

Someone reading B’s statement would have shorted gold. But, why one went wrong? Next paragraph sheds some light.

Economists are economists and they look at correlations, regressions etc and predict future (B is an economist). Traders are traders and they have an eye on what economists are saying and what markets are saying (A is a trader). Very rarely, economists will understand pulse of markets. Traders will understand pulse of markets for some time and then go wrong somewhere and become history. Traders come and go but economists remain. However, that does not happen with all traders. One in a million traders hangs on until death.

In this battle between A and B, small investors reading financial articles are losers. Should they believe A or believe B?

Now let us say, A has gone right. Leaderless crowd reads in financial magazines (that A has gone right) and follows A. Sometime later, A goes wrong and some other trader goes right. This time, leaderless crowd abandons A and follows the other trader until he goes wrong. Once this other trader goes wrong, Leaderless crowd follows some other trader. In the process, this small investor loses all the money and abandons market forever.

-Shrihas Pandharkar
DYOR.
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