Faster than your high beams
Criticism -- perhaps justified, perhaps not -- has been levelled recently at both my motives and me.
My initial reaction to these comments was surprise, even after considering their source. (The writer and I have a history; he views as insufficient the amount I share re the markets. I suspect, however, that no amount for him would be enough.) My second reaction was to respond in some fashion. But I too want to learn, so I asked another regular reader to offer his insights, after reading the withering criticism of yours truly.
Gee. I wonder what he really thinks!!
I disagree entirely with the motives he has attributed to you. But I do agree with some of his observations -- absent the motives. You are, in fact, incredibly good at pattern recognition (witness how quickly you got a high score on that puzzle game you sent me: a score I still haven't been able to match after several days) and that many of your observations elude most of us. They certainly elude me. Your skill is an incredibly difficult one to explicate or for us to replicate, there being so much intuitive in what you do. In a sense you see something when you recognize (let's say) that AAPL is about to go aggressively bullish while still in it's base building period. Now recognizing that it is building a base is not so difficult, but recognizing that, unlike dozens of other attractive stocks that are building a base, AAPL is the one ready to accelerate upwards is quite difficult. You can point to the specific series of points, sub-patterns, volume surges, etc that drove your decision, and once pointed out, these too are simple to recognize, but for us to recognize it is a form of fallacious backwards pattern fitting, kind of like starting with a result and searching for a best-fit explanation of why it happened. It is not such for you because you recognized it in a predictive fashion, but it is for us.
What we lack are two things: We have great difficulty differentiating the events surrounding the real end of a base-building process, as opposed to the dozens of head fakes that probably took place within that base-building process, and, even more importantly, we lack the ability to differentiate, IN ADVANCE, the differences between an impending end of a base building process and the action of dozens of other stocks that are building, and potentially ending bases, at a given period of time. Without the ability to differentiate and discriminate it is hard for us to do what you do in a predictive manner.
That doesn't mean that what you offer is useless. It isn't to me, though I use the insights you've given me in a way that would probably frustrate you. Namely it tends to allow me to avoid big mistakes, of which I used to make many and which I rarely make now. Why? Because while the signs of an imminent move up or down may be hard for me to spot, it is not difficult for me to differentiate between a stock that has obvious signs of danger - heightened volatility, big volume on down days, etc. It is also not hard for me to recognize a pattern that has some potential and needs to be watched. But what it doesn't give me is something to differentiate it from others having similar characteristics but which may yet remain mired in it's base for many months and perhaps ultimately give signs of suddenly breaking down. So I often tend to wait to your endless frustration. It has also taught me to pay much more attention to the pattern before committing to a company whose business plan I like: that there is a difference between liking a company and knowing when the odds favor a purchase. Selling is another story. Selling losers is easy, many times much too easy. But selling winners is something I've yet to master and I've found little in your work or the work of others that can help me sell winners before they start to decline (at least I no longer suffer the full extent of the decline and that is extremely useful.)
The difficulties most people have with pattern recognition is why systems like O'Neil work so well for many. They are relatively simple and unambiguous. They provide clear buy and sell rules and they allow most people to follow a discipline that has a net positive return and avoids the worst outcomes. Do they offer anywhere like the gains obtained from correctly purchasing stocks during base building? Of course not. But it does beat a mechanism that buys stocks in bases without understanding when and how they are going to break out of their bases to the upside.
So, I come to the final point I want to make. There is a big difference between knowing and teaching. Teachers do not often come from the best practitioners. The clearest case I can think of is mathematicians. There is a field with hard and fast rules. The experts are those who understand the rules best and know perfectly well how to apply them. Yet, almost invariably these expert mathematicians make absolutely horrid teachers. Why? Because they have forgotten what it is NOT to know. They simply do not understand why someone wouldn't understand such an obvious self-evident thing as a mathematical theorem. After all, it is nothing but logic.
Teaching is largely about removing obstacles to understanding. Such things as misconceptions, misapplication of fundamental principles, failure to understand what differentiates one case from another, are the things that keep students from advancing, and experts almost always have little tolerance for and little understanding of these blockages and misconceptions. They tend to become easily frustrated by what they come to believe must be the dullness of their students and they fail to understand why their students could possibly not understand something that has already been explained.
In fact it has always been my contention that the very best teachers come from people who understand more, but not too much more, than their students. Why? Because they still remember what obstacles hindered their own understandings and what insights allowed them to advance beyond them. Teaching involves endless repetition, extreme patience, and an ability to understand what a student isn't getting and devise ways to circumvent and overcome those blockages.
By and large, despite what I believe is your honest desire to share your abilities, the qualities of a great teacher are not your best points. You are, in general, impatient, hate repeating something you've already said, and have little interest in why someone is getting things wrong. You are only interested in them getting it right. All this would probably be true regardless of the subject, but unlike math, which is fundamentally obvious, you seek to impart a skill that is inherently arcane. It is a skill that requires intuitive insight, and whose results are nowhere near infallible, only more positive than negative, thus imparting to the student negative reinforcement as well as positive reinforcement.
I actually think your blog is a much better venue and approach than was your newsletter. A newsletter has more of a temporal context than a blog. The inherent assumption of an investment newsletter is that it contains actionable intelligence. It implicitly says: here is the situation and you need to act now. On your blog, you've been much more able to focus on the developing situation of a stock, alerting people to a potential opportunity with a trigger point that lies in the future. However, it won't necessarily wind up teaching lots of people to act as you do.
Here's a suggestion that might help, though I think it would still require you to become much more interactive with your readers and to commit to "understanding their misunderstanding" and helping them, basically one on one, to overcome them. Instead of focusing solely on an emerging pattern that holds opportunity, take the time to simultaneously point out a similar situation that doesn't offer potential and explain the difference. That's a lot of work, but it would help some people do a better job of differentiating between bases and bases with opportunity.
But, to return to what I'm sure is your main concern, I think the writer's attack on your motivations is entirely wrong and mean-spirited, though I have no idea why he/she said it.
~~~~~~~~~~~~~~~~~~~~~~~~~~~~
This response is brilliant. Could I have said it better, or even as well? (Probably not.) The entire letter is phenomenal; the second paragraph alone is worth the price of admission.
My stated objective is to share my insights into how the markets work, how to perceive opportunity, and even share a specific recommendation or two. I think I have done that: AAPL, HANS, SBUX, the homebuilders, and of course GOOG. (And excluding many, many others.) To a one, I believe I have been extraordinarily clear -- what, when, and how to buy (or sell).
But I am human, after all, and make errors with the best of them... from which I try to learn. When the respondent states, "You are, in general, impatient, hate repeating something you've already said, and have little interest in why someone is getting things wrong. You are only interested in them getting it right.", I can only nod my head in agreement. I am impatient, with me as much as anyone else. I do detest the necessity to repeat myself... although I realize with new readers coming aboard all the time I must do precisely that.
Contrary to the first writer's belief, I prefer questions and interactivity, not some fawning sensibility. I cannot recall a time in this blog's history that I ever responded to the embarrassing lyrics of gushing thanks. What response can one make? Questions, however, are a different matter; in fact, my requests for questions are so copious and regular they are nigh on pleading. Of course, I prefer to answer questions that would help all readers not solely the writer.
I seek interactivity. From interactivity comes community. And from community can come the alerts that help us all. I recall, for example, AP's intelligent comments re YHOO, thus alerting us to that opportunity, and many more examples.
This blog is as much your home as it is mine. If I fail you, as the first writer attests, then I fail me; my objective recedes faster than I can drive -- even with my high beams on. Please help me help you. Your questions and comments are always welcome... and desired. On this topic, or any.
I am going to pull off to the side of the road now, and read each letter once again (at least); the criticism and its solicited response. I perceive each as critical to my successful development as an investor, as a writer, as a pedagogue... and, yes, as a human being. Thank you for joining me on this excursion.
At the risk of pissing (blank) off, I will explain David. You (along with the rest of us) can't understand much of what he says because that is just as he intends it.
He is a genius at pattern recognition and prediction of price movements in the financial markets. He really IS brilliant, but... He presents his case not so that you will truely understand it but so that all who read will see and recognize his genius. He feeds on the positive feedback from those who recognize his amazing abilities. While he professes his desire to teach the "commonweal", he realy only teases and tantalizes. How does David know what he knows and wouldn't you like to know too? He dangles the keys that unlock the puzzle just out of reach. In truth, if he could teach us all how he does it, we wouldn't need him anymore and his adoring audience would go away to make mountains of money on their own. That wouldn't serve his purposes. There have been rare occassions when he lets slip real nuggets of wisdom, but if intentional, it is only to keep the weary from wandering. He is subtle, but over time the message is obvious: he can count on one hand those who can use technical analysis to predict future price movements, he is one of them and the rest of us never will be. "Sorry Charlie, only the best can be Starkist". I think he is certifiably insane.
My initial reaction to these comments was surprise, even after considering their source. (The writer and I have a history; he views as insufficient the amount I share re the markets. I suspect, however, that no amount for him would be enough.) My second reaction was to respond in some fashion. But I too want to learn, so I asked another regular reader to offer his insights, after reading the withering criticism of yours truly.
Gee. I wonder what he really thinks!!
I disagree entirely with the motives he has attributed to you. But I do agree with some of his observations -- absent the motives. You are, in fact, incredibly good at pattern recognition (witness how quickly you got a high score on that puzzle game you sent me: a score I still haven't been able to match after several days) and that many of your observations elude most of us. They certainly elude me. Your skill is an incredibly difficult one to explicate or for us to replicate, there being so much intuitive in what you do. In a sense you see something when you recognize (let's say) that AAPL is about to go aggressively bullish while still in it's base building period. Now recognizing that it is building a base is not so difficult, but recognizing that, unlike dozens of other attractive stocks that are building a base, AAPL is the one ready to accelerate upwards is quite difficult. You can point to the specific series of points, sub-patterns, volume surges, etc that drove your decision, and once pointed out, these too are simple to recognize, but for us to recognize it is a form of fallacious backwards pattern fitting, kind of like starting with a result and searching for a best-fit explanation of why it happened. It is not such for you because you recognized it in a predictive fashion, but it is for us.
What we lack are two things: We have great difficulty differentiating the events surrounding the real end of a base-building process, as opposed to the dozens of head fakes that probably took place within that base-building process, and, even more importantly, we lack the ability to differentiate, IN ADVANCE, the differences between an impending end of a base building process and the action of dozens of other stocks that are building, and potentially ending bases, at a given period of time. Without the ability to differentiate and discriminate it is hard for us to do what you do in a predictive manner.
That doesn't mean that what you offer is useless. It isn't to me, though I use the insights you've given me in a way that would probably frustrate you. Namely it tends to allow me to avoid big mistakes, of which I used to make many and which I rarely make now. Why? Because while the signs of an imminent move up or down may be hard for me to spot, it is not difficult for me to differentiate between a stock that has obvious signs of danger - heightened volatility, big volume on down days, etc. It is also not hard for me to recognize a pattern that has some potential and needs to be watched. But what it doesn't give me is something to differentiate it from others having similar characteristics but which may yet remain mired in it's base for many months and perhaps ultimately give signs of suddenly breaking down. So I often tend to wait to your endless frustration. It has also taught me to pay much more attention to the pattern before committing to a company whose business plan I like: that there is a difference between liking a company and knowing when the odds favor a purchase. Selling is another story. Selling losers is easy, many times much too easy. But selling winners is something I've yet to master and I've found little in your work or the work of others that can help me sell winners before they start to decline (at least I no longer suffer the full extent of the decline and that is extremely useful.)
The difficulties most people have with pattern recognition is why systems like O'Neil work so well for many. They are relatively simple and unambiguous. They provide clear buy and sell rules and they allow most people to follow a discipline that has a net positive return and avoids the worst outcomes. Do they offer anywhere like the gains obtained from correctly purchasing stocks during base building? Of course not. But it does beat a mechanism that buys stocks in bases without understanding when and how they are going to break out of their bases to the upside.
So, I come to the final point I want to make. There is a big difference between knowing and teaching. Teachers do not often come from the best practitioners. The clearest case I can think of is mathematicians. There is a field with hard and fast rules. The experts are those who understand the rules best and know perfectly well how to apply them. Yet, almost invariably these expert mathematicians make absolutely horrid teachers. Why? Because they have forgotten what it is NOT to know. They simply do not understand why someone wouldn't understand such an obvious self-evident thing as a mathematical theorem. After all, it is nothing but logic.
Teaching is largely about removing obstacles to understanding. Such things as misconceptions, misapplication of fundamental principles, failure to understand what differentiates one case from another, are the things that keep students from advancing, and experts almost always have little tolerance for and little understanding of these blockages and misconceptions. They tend to become easily frustrated by what they come to believe must be the dullness of their students and they fail to understand why their students could possibly not understand something that has already been explained.
In fact it has always been my contention that the very best teachers come from people who understand more, but not too much more, than their students. Why? Because they still remember what obstacles hindered their own understandings and what insights allowed them to advance beyond them. Teaching involves endless repetition, extreme patience, and an ability to understand what a student isn't getting and devise ways to circumvent and overcome those blockages.
By and large, despite what I believe is your honest desire to share your abilities, the qualities of a great teacher are not your best points. You are, in general, impatient, hate repeating something you've already said, and have little interest in why someone is getting things wrong. You are only interested in them getting it right. All this would probably be true regardless of the subject, but unlike math, which is fundamentally obvious, you seek to impart a skill that is inherently arcane. It is a skill that requires intuitive insight, and whose results are nowhere near infallible, only more positive than negative, thus imparting to the student negative reinforcement as well as positive reinforcement.
I actually think your blog is a much better venue and approach than was your newsletter. A newsletter has more of a temporal context than a blog. The inherent assumption of an investment newsletter is that it contains actionable intelligence. It implicitly says: here is the situation and you need to act now. On your blog, you've been much more able to focus on the developing situation of a stock, alerting people to a potential opportunity with a trigger point that lies in the future. However, it won't necessarily wind up teaching lots of people to act as you do.
Here's a suggestion that might help, though I think it would still require you to become much more interactive with your readers and to commit to "understanding their misunderstanding" and helping them, basically one on one, to overcome them. Instead of focusing solely on an emerging pattern that holds opportunity, take the time to simultaneously point out a similar situation that doesn't offer potential and explain the difference. That's a lot of work, but it would help some people do a better job of differentiating between bases and bases with opportunity.
But, to return to what I'm sure is your main concern, I think the writer's attack on your motivations is entirely wrong and mean-spirited, though I have no idea why he/she said it.
~~~~~~~~~~~~~~~~~~~~~~~~~~~~
This response is brilliant. Could I have said it better, or even as well? (Probably not.) The entire letter is phenomenal; the second paragraph alone is worth the price of admission.
My stated objective is to share my insights into how the markets work, how to perceive opportunity, and even share a specific recommendation or two. I think I have done that: AAPL, HANS, SBUX, the homebuilders, and of course GOOG. (And excluding many, many others.) To a one, I believe I have been extraordinarily clear -- what, when, and how to buy (or sell).
But I am human, after all, and make errors with the best of them... from which I try to learn. When the respondent states, "You are, in general, impatient, hate repeating something you've already said, and have little interest in why someone is getting things wrong. You are only interested in them getting it right.", I can only nod my head in agreement. I am impatient, with me as much as anyone else. I do detest the necessity to repeat myself... although I realize with new readers coming aboard all the time I must do precisely that.
Contrary to the first writer's belief, I prefer questions and interactivity, not some fawning sensibility. I cannot recall a time in this blog's history that I ever responded to the embarrassing lyrics of gushing thanks. What response can one make? Questions, however, are a different matter; in fact, my requests for questions are so copious and regular they are nigh on pleading. Of course, I prefer to answer questions that would help all readers not solely the writer.
I seek interactivity. From interactivity comes community. And from community can come the alerts that help us all. I recall, for example, AP's intelligent comments re YHOO, thus alerting us to that opportunity, and many more examples.
This blog is as much your home as it is mine. If I fail you, as the first writer attests, then I fail me; my objective recedes faster than I can drive -- even with my high beams on. Please help me help you. Your questions and comments are always welcome... and desired. On this topic, or any.
I am going to pull off to the side of the road now, and read each letter once again (at least); the criticism and its solicited response. I perceive each as critical to my successful development as an investor, as a writer, as a pedagogue... and, yes, as a human being. Thank you for joining me on this excursion.
posted by David M Gordon | 12:29 AM
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