Don’t Blithely Accept the Views of Stock & Commodity Commentators – Here’s Why (+2K Views)

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Many…commentaries by people referred to as ‘gurus’ or ‘experts’…often don’t state the assumptions that underlie the opinions they express leaving the reader…to take at face value what is said based on ‘assumed expertise’. I suggest you exercise caution and not blithely accept the views of  ‘experts’ without first understanding their underlying assumptions and then satisfying yourself that those assumptions both make sense and are internally consistent with the views and opinions the ‘experts’ express, and the advice they give. Let me explain more fully below.

By Ian R. Campbell

The post below is courtesy of  www.munKNEE.com (Your Key to Making Money!). The author’s views and conclusions are unaltered and no personal comments have been included to maintain the integrity of the original article. Please note that this paragraph must be included in any article re-posting to avoid copyright infringement. 

Campbell goes on to say (with his kind permission), and I quote:

“I recently read the text of an interview with a person I believe to be well-known to junior resources markets’ retail traders and investors.  I have no reason to believe that person is uninformed, not diligent, or says anything they don’t believe. That said, however, in the interview when discussing views on the Junior Gold Sector (and to a lesser degree other sectors) the person being interviewed:

• expressed opinions that I believe inherently had to be based on underlying assumptions with respect to overall financial markets future performance.  I think this in the belief that in the financial markets ‘rising tides raise all boats, and falling tides lower them’. Yet no assumptions were expressed or discussed with respect to the status or direction of the overall financial markets, but views (not assumptions) were expressed with respect to specific market sectors; and,

• stated that it is only ‘a question of when’ the price of physical gold will rise to a point when the Junior Gold Sector again would be in favour (my summary).  Again, no assumptions underlying a rising gold price were expressed or discussed.  The gold price is driven by (among other things) prevailing macro-economic events, interest rates, inflation rates, the gold supply/demand equation, the so-called ‘fear factor’, and trading activity.  If the gold price goes up, it might well go up in the current economic environment for reasons that could negatively impact the overall financial markets, including gold juniors and producers.

To be fair, the person being interviewed may have had detailed, sensible responses to explain said underlying assumptions if asked to do that by the interviewer but my bottom line is that, irrespective of whether the person being interviewed ought to have stated said underlying assumptions without being asked, or whether the interviewer ought to have asked that person to summarize those assumptions, neither of those things happened.

What I think a reader of such an interview is left with may well be something they might act on, where I wouldn’t do that without a clear understanding of the macro-economic and financial market assumptions of the expert who expressed views and opinions.

In my view the interview I have discussed above is no better, nor is it worse, than many interviews, articles and commentaries I hear and read – both in mainstream media and on the Internet.

I suggest that:

1. someone who is genuinely an expert ought to feel a responsibility to fulling informing his/her readers and listeners, including carefully communicating underlying assumptions when communicating opinions or advice.  Doing this enables readers and listeners to better decide whether or not to act on those opinions or that advice;
2. it is all to easy for an ‘expert’, who is not under cross-examination by a Court or by an interviewer, to play on their reputation, and be spontaneous and less than 100% diligent in expressing opinions or in giving advice; and,
3. a portion, and perhaps a large portion, of the responsibility of ensuring experts communicate their assumptions, opinions, and views in a fulsome way rests on the shoulders of the interviewers and reporters.  The better those people are at what they do, the more likely their work will produce well thought through and documented results.

Conclusion

I suggest you exercise caution and not blithely accept the views of ‘experts’ without understanding their underlying assumptions and satisfying yourself that those assumptions both make sense and are internally consistent with the views and opinions the ‘experts’ express, and the advice they give.

I have spent my life as a recognized ‘business value expert’ in Canada. For me, ‘experts’ are like the gunfighters in the OK corral.  They (me included) are only as good as their ‘last time out’.”

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