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Tie Yourself to the Mast as Market Noise Gets Louder

October 15, 2014

When markets swing, Twitter turns into a free-for-all where every financial pundit and his great-aunt weighs in with an opinion, writes Josh Brown in his Reformed Broker blog. Advisors need to tune out the noise (and try to get clients to do the same). To aid them in this endeavor, the CEO of Ritholtz Wealth Management in New York breaks down the types of tweets he predicts will proliferate — a hilarious gloss on the various investor types that tend to crawl out of the woodwork and get loud during periods of market volatility.

Market-neutral investors will tweet some version of “I told you so,” according to Brown. Others will boast about their 20/20 vision, based on whatever tiny doubt they may have recently expressed about the market’s resiliency. Still others will seize on a news event — Ebola, the dollar, the Pope’s apparent softening toward gay divorcees — and say it can’t fail to cause a correction.

Tons and tons of data will be hauled out and put to poor use, warns the Reformed Broker. Furthermore, investors who normally believe in fundamental market analysis will start obsessing over daily and weekly price charts. “There are no atheists in a foxhole and there are no pure fundamentals guys in a correction,” Brown writes.

People are hardwired to err on the side of hysteria, he points out; the cavemen who were complacent in the face of danger didn’t survive to reproduce. So “of course we’re gonna retweet Zero Hedge and John Mauldin links!” Besides fear, expect a higher-than-usual complement of rage on Twitter, Brown adds, as users take out on one another the frustration they’re feeling about their portfolios. He advises his readers to take a deep breath and count to 10 before tweeting angrily.

By Murray ColemanJoan Warner
  • To read the Reformed Broker article cited in this story, click here.