Barry Ritholtz (@Ritholtz) took time out of his busy schedule to participate in the StockTwits Midday Chat last week. He fielded a wide range of questions from our community – touching on his book Bailout Nation, indicators he watches to form investment ideas, thoughts on social media, and his borderline inappropriate relationship with Josh @reformedbroker Brown. No questions were off limits and Barry was up to the task.
His answers, peppered with links to some of his classic The Big Picture posts follows.
@StockTwits: Welcome to the StockTwits Midday Q&A with @ritholtz. Barry, thanks for taking questions from our Community.
@ppearlman: Does the market close higher or lower from here at year’s end?
@Ritholtz: How on earth do I know? LOL. But its a telling question, and the fuller more appropriate response is here: http://bit.ly/jozgqU
@harmongreg: how many blog posts do you do per day? And do you have a ghost poster?
@Ritholtz: I do a long post early AM, then linkfest, and chart later on. If you look at the site, Think Tank tab is where guests post.
@ZorTrades: we worked at the same place years ago coleman/investec-ernst/maxim, how long do you think the transactional model will last?
@Ritholtz: Rapidly consolidating on Institutional side, slowly dying on the retail side. (But I thought Retail BD was dead 10 years ago!)
@StockSage1: Does the euro-zone accelerate their progress towards a federal/super-sovereign fiscal authority or continue wasting time? And does the ECB give in after the markets call their bluff? i.e. Monetize and continue to hold defaulted Greek paper as collateral?
@Ritholtz: Dunno about ECB — Like ours, their Bailouts encourage more bad economic behavior. Better off with pre-packaged bankruptcy.
@ctringham: What is the ‘normal’ correction size after a 100% rally like the one we had over the past 2 years?
@Ritholtz: Only 2 prior examples: 1933 and 1938 (100% rally following 50% or more selloff) Each time, nearly all the gains were lost!
@reformedbroker: What are we doing for lunch today?
@Ritholtz: Tradional Carbo loading ala Lindzon!
@harmongreg: when do you think (approx) we will see a bottom in housing?
@Ritholtz: Housing remains 8-10% overvalued; Question is will it revert to mean or careen past? Depends on UE and next recession.
@ivanhoff: does fusionIQ trade solely on an algorithmic basis and how often your does personal intuition override your system’s signals?
@Ritholtz: Fusion IQ is the tool we develop + use; Trading depends upon some additional factors, but goal is always Safe Alpha generation.
@enni82: What do you think of the future of solar power?
@Ritholtz: It is limited because the sun will burn out in 6 billion years. But if you can work with that time limitation. . .
@zerobeta: Does @ReformedBroker really write all his blog posts while listening to Sarah McLachlan?
@Ritholtz: He is actually a huge Indigo Girls fan, I am constantly telling him to turn that crap down!
@ajb_2010: Who’s your favorite actor from the Doctor Who series?
@Ritholtz: I’ve warmed up to the new doctor (Matt Smith) but adore David Tennant.
@gvwolf3: Suggestions on how to get into investment management industry? Equity research?
@Ritholtz: Fall assbackwards into it like I did!
@dominicrivera: who’s the better blogger? You or @thereformedbroker?
@Ritholtz: One day the student shall surpass the master.
@ReformedBroker: dude, cmon….
@ivanhoff: what was the biggest drawdown in your investment career?
@Ritholtz: With Options, 100% loss. With equities, nearly as bad early on. I swore that would never happen again, and consider it tuition.
@chicagosean: When your book Bailout Nation came out, you must’ve made some enemies in high places. Any good stories?
@Ritholtz: More nuanced than you would imagine. Less overt, more subtle. Life is too short to deal with jerks and creeps, so I ban commenters and block Tweeters with Extreme Prejudice.
@chicagosean: Any plans to write “Bailout Union” for our European friends?
@Ritholtz: None whatsoever; let the Europeans write their own damned books! Next book I write will be on using RISK/REWARD equation to obtain better results. Not market timing, but Opportunity Management.
@ivanhoff: what are the major elements of your favorite investment setup. 52wk high, 52wk lows, volume expansion, range expansion…?
@Ritholtz: 6 factors: Upward price, High Short interest relative to float, Expanding volume, Low Institutional Ownership, disliked by Analysts, and way off highs.
@stinkystank: in your response to @ivanhoff, you said Low Institutional Ownership. Can you expand on this?
@Ritholtz: Low Institutional Ownership relative to historic means — it suggests big potential buyers previously sold, and may rebuy.
@ivanhoff: what do you think is the best background for a good investor – lawyer, philosopher, comedian, engineer…?
@Ritholtz: Hanging curve ball: http://bit.ly/kvP553
@weissben: as a trend setter in the financial blogosphere, where do you source the bulk of your material? How are you using social media?
@Ritholtz: A combination of MSM, other bloggers, a few intelligent curators, and the voices in my head (they never shut up!).
@StockTiger: Gold metal has not come back to touch its 60-week EMA in two years – when is it coming?
@Ritholtz: I don’t know how to value gold, so I lose an important component of my methodology. Its about finding a greater fool to me.
@howardlindzon: who was a mentor in the biz?
@Ritholtz: Oooh, good question. Too many for 140 characters — it should really be a post.
@ivanhoff: how do u think social media is changing the way people trade/invest? Is it for better or for worse?
@Ritholtz: It depends upon the Venue. Yahoo Message Boards became a cesspool and were worthless; Filtering/Policing here on StockTwits add huge value. Truth is a key factor in Investing; and self-delusion rampant amongst Traders. Collective process gets to Truth = better results.
@weissben: which bloggers/curators do u read?
@CO_Trader: I’m young and interested in markets/trading but don’t work on The Street or have connections there? What’s my first step?
@ivanhoff: how often are you wrong in your investment/trading decisions?
@Ritholtz: Wrong about half the time. Its part of investing — Secret is to max out when you are correct / minimize damage when wrong. One of my favorite things I’ve written was this (from 2005): “Expect to Be Wrong in the Stock Market”
@Ritholtz: Last thing on wrong: Call it “Strong Opinions, Weakly Held.” Trust your process, but be willing to reverse http://bit.ly/k0BvZd
@allstarcharts: what are a couple of your favorite leading indicators for the US Equities Market that you are currently watching?
@Ritholtz: LEIs, Retail Sales, SPX ECRI Index.
@Ritholtz: Hey guys, thanks for all your questions — hope I answered them! 140 characters is tough to answer nuanced queries . . .
- Compiled by Sean McLaughlin: Editor, StockTwits (@chicagosean)
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