One of the biggest challenges for investors is filtering out bad, useless, or even costly “information.” I have a method for screening out the noise and using my time more effectively. Part of it is keeping the TV on mute and using TIVO to check out anything that is really significant. You can also just skip articles that obviously do not meet the test.
Here is a good starting list of what to ignore. Feel free to suggest additions.
- The Hindenburg Omen – or any other method using BO (i.e. backtested overfitting) and failing the smell test.
- Commentary from people who are famous for being famous – their websites confuse media appearances with credentials.
- Tobin’s Q – a great idea fifty years ago, but not relevant for modern companies.
- Bond guys opinions about stocks – don’t ask your barber if you need a haircut (Warren Buffett)
- Stock guys opinions about bonds – see above.
- PMI data lacking multiple business cycles – you have to start somewhere, but we do not need to believe it.
- Recession predictions from some “expert” who cooked up a model last week – too few cases, too many variables.
You can save many hours and also avoid some bad decisions by rejecting this useless and harmful noise.
Chris Hohn the founder and manager of TCI Fund Management was the star speaker at this year's London Value Investor Conference, which took place on May 19th. The investor has earned himself a reputation for being one of the world's most successful hedge fund managers over the past few decades. TCI, which stands for The Read More