RE:If it's not one thing, it's your MotherThanks Obscure - interesting post
Your post got me thinking about all the changes I have seen over the decades in the investing world and wondered if those changes were a good thing or bad thing.
Before going on, I must warn people that what I have to say will be considered OT by many and if you are one of them please stop reading here.
What you were talking about in your post in one sense is nothing new. There have always been factors which cause the markets in general and the SP of individual stocks or industry sectors to have volality. What is different now from say forty years ago is that perhaps there is too much information and a hightened ease to get information and that information is too readily available.
For example, forty years ago before the internet, a friend might call you and say that the SP of Company X was making a move. You would call your broker and most likely have to leave a message for her to call you back. A couple of hours later you would get a return phone call and you would ask about the company and what was going on. Most of the time she would say, I will pass on the question to the research department. If you were lucky you might get answer back the next day but often it might be a couple of days later. Now the same information is available in microseconds.
Back then a busy day on the TSX was about 5 million shares traded. Now is is more twenty times that figure. Stock transactions cost hundreds of dollars. Now they are almost free. The difference between a bid and an ask was measured in eights of dollars (12.5 cents). Now it can be a thousandth of a cent.
Back then they had a thing called "programmed trading" which was a computer that basically bought or sold based on the index hitting a certain number (pretty simplistic). Now we have high speed computers doing programmed trading based on game theory which has nothing to do what is actually happening to a particlar company and now with AI it has gotten even worse and will get even more so as time rapidly if you believe what the people who know about AI are saying (I for one do).
So now retail investors (that means you and I) are faced with a situation where we have too much infomation and too little real knowledge to make rationale decisions - a form of information constipation. Worse yet, while we have always been outgunned by the pros, that situation has gotten much worse and now with AI as Musk points out are being trained to lie, it is going to get real tough to figure anything out and make good decisions.
So great Experienced!! Thanks for the history lesson.
But what should I do about it?
1.....simplify and filter out as much noise as possible but figuring out what are the important things to keep track of for the companies that own shares in and focus just on those one or two things. So for example in oil, I look at the delta between the Brent price and the Saudi social cost of producing oil and when that delta gets to about a certain percentage I buy and then sell when it narrows. I don't worry about weekly and daily inventory numbers since as Obscure points out, they can be manipulated by the paper as opposed to the physical market.
2....assess your information sources and figure out who you think you can trust and see what they say and ignore everything else
3....portfolio diversification is theoretically a good thing but that also means that if you are doing it yourself, it means keeping track of a lot of companies which in turn is lot work and takes probably more time than you have. Think about limiting the number of stocks you hold and also focus on industry sectors that you know a lot about.
4...take a broader view of the world. Think about where the world is going and what industries will benefit from that change and which ones will be negatively affected and invest where the world is going NOT where where it has been.