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I spoke with Jack about his new book Market Sense and Nonsense: How the markets really work (and how they don’t). The Kindle version is available now, the hardcover on 11/6.

This is Jack as analyst, not as trader interviewer. I think the insights herein will benefit investors especially over traders, although both are served well. Jack totally destroys the EMH in this book. He also debunks a great deal of conventional wisdom for the investor, which I think will be shocking at first. Why? Conventional wisdom “feels good” and to go against the grain so to speak as an investor takes a great deal of emotional intelligence — and a strong inner voice — which most investors don’t have. Good trading and investing oftentimes does not “feel” good at all. It’s much easier for a newbie or amateur to go with the crowd and succumb to one’s emotions. What feels safe is normally not a proper risk management decision for the untrained.

At the end of each chapter, Jack delineates several “Misconceptions” that I believe are worth the price of the book. One in particular deals with when it’s NOT a good idea to just blindly buy the S&P 500 after it’s gone up a certain amount.

Market Sense and Nonsense is an objective take on popular investment themes that is backed with a great deal of data to support its claims. I think the conclusions in this book will surprise most of its readers and that’s a good thing. At least they will be armed with strong arguments to bring up with their advisors.

One of my friends sent me this the other day. I remember doing the interview, but didn’t know it was available.

I’m not a day trader, nor do I suggest that you considering becoming a day trader. Too much work for too little gain. I don’t consider myself a “day trading expert” either…at least in the manner that they are using the expression.

“If you don’t know who you are, it doesn’t matter what you know about trading.”

One of my first books on commodities was Jim Roger’s Hot Commodities – How Anyone Can Invest Profitably in the World’s Best Market.

Among other things, I took away the knowledge that commodities were real things that were understandable if you put the work in and most of all were influenced heavily by supply and demand.

Jim also made it very clear that when it came to things like mines it was far from a fast process. So in short by the time price started advertising that there was more demand than supply it took a considerable period of time to get a mine ‘online’ and in turn it was quite easy to guess what would happen to the price of these now increasingly scarce resources.

Of course we then have the reality that the deals start being done to increase production. There is a good time of money making by the producers but then production catches up with the lag that was in place and then price has a tendency to drop as supply has matched or surpassed its previous levels.

The New York Times had an interesting infographic on how the Natural Gas Bounty is Turning Against Producers that I feel illustrates the kind of thing Jim talks about in Hot Commodities and illustrates the supply / demand cycle in a popular commodity.

To get a good take on where the Natural Gas market is right at the moment listen to he recent podcasts:

The most recent Energy Market Update podcast

“The people who were right a lot of the time were people who often changed their minds.” – Jeff Bezos

Now what does Jeff Bezos has to do with trading? A lot! He might not trade futures, or day trade Google options, but he is a business man and a speculator, like all of us full time traders, and as you can see from the quote above, he understands and incorporates “stop losses” into his business philosophy.

Jeff Bezos goes on, “Consistency of thought is NOT a particularly positive trait. It’s perfectly healthy — encouraged, even — to have an idea tomorrow that contradicted your idea today, the smartest people are constantly revising their understanding, reconsidering a problem they thought they’d already solved. They’re open to new points of view, new information, new ideas, contradictions, and challenges to their own way of thinking.”

Too many of traders, fall “in-love” with their trades. In communicating with like-minded people (like other gold bugs), they build a circle of “confidence” around themselves. This helps them feel emotionally secure, but they should be looking for holes in their trading ideas instead.

The ability to be open to different points of view know that it is OK to change your mind, i.e. take that stop loss, is CRUCIAL for any business man, as well as any trader. Take Jeff Bezos advice and run your trading business accordingly.

Podcast: Play in new window | Download

Frank Clements and Michael Martin talk about the past week in Energy Futures and about the upcoming week also.