Busting Market Myths | Truth or Skepticism
Aug 6, 2015
Dylan & Tom are back for another episode of Truth Or Skepticism! In this segment, Dylan comes out firing with five trading & finance myths ranging from complexity being bad, to the deck being stacked against the little guy. Will they bust these myths or find truth to them? Tune into the segment here to find out! Here’s a quick preview below:
Dylan believes that the deck is stacked against the little guy because the larger players generally have a better information flow. Tom doesn’t believe information is as important as good technology. In the old days, the little guy would be forgotten because orders were manually routed. In today’s tech age, the little guy is in the same electronic queue. High frequency trading helps the little guy’s bid/ask spread as well.
Tom & Dylan discuss the notion that complexity adds risk. They dissect what complexity actually means, and compare the differing viewpoints - complexity of a position in an underlying vs. complexity of the variables that can affect a position. Tom argues that complexity is something that should be endorsed, not avoided.
Tom & Dylan discuss volatility and compare it to real life. Children hopefully have a low volatility life, but as one graduates from different education systems and begins to branch out alone, that’s when the volatility starts. Tom & Dylan both agree that volatility is an opportunity, not a bad thing.
Dylan begs the question - are there market wizards out there? He goes on to explain that diversification in the traditional sense is very different than the tastylive definition. Tom believes inversely correlated underlyings are the key to diversification, and blames the lack of diversification knowledge on both the financial service sector as well as the passive investor.
Tom & Dylan both agree that when it comes down to it, if you pay a lot of commissions from trading a lot, you’re going to be better off than if you’re paying a ton of fees for someone else to manage your money. Tom reflects on his brokerage days and discusses how the people who paid the most commissions almost always made the most as well.
To see earlier episodes of Truth or Skepticism with Dylan Ratigan, you can watch them here on the tastylive archives!
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