A week ago I referred to the Cyprus news as “noise” and that as traders we should be aware of headlines but only make our decisions to act based on price action. My commentary prompted one reader/viewer to question this outlook. Below is the unedited commentary which we exchanged, my comments are bolded responses to his questions.
I was disappointed with your comment about the Cyprus “Non-event” comment and its lack of any effect on our markets. It does appear to be serious, now their banks will not open to maybe the 25th of March. But more importantly, who do you think might be holders of these bonds in Cyprus? Are you sure the no US banks have exposure.
Perhaps to put this in perspective, since your thoughts about taking 10% or more of depositors money is a non-event, then as a CMT, financial planners, broker, whatever, what is your thought about the non-event that in 2008 alone the US Dollar lost 20% of it’s value! Not mentioning the further loss since 2008 in the devaluing process, how do you compare a direct 10% loss or theft in Cyprus depositors accounts to a 30% or more devaluation in your own money by our own government? A non-event?
Remember I am only interpreting price action, I probably shouldn’t have mentioned Cyprus but I am aware of news from a perspective of how it helps to shape psychology and ultimately price. Would you have been disappointed if I called the fiscal cliff or sequestration a non event at the time?
As a trader who gets paid on price action, I have learned to put aside my opinion of an event and stick to an objective view of price. www.onlypricepays.com I learned long ago that the market does not care about my opinion. This is my discipline, it may not work for everyone but it works great for me.
No, but I would have been disappointed if you did not mention the pattern of fiscal issues routinely being faced as a result of reluctant or inept political choreography to find a more consisent and effective methodoly in fiscal accountability and the three ways to absolve the country of debt. Those being de-valuing the currencies, imposing artificial and perhaps real nominal inflation, or just stealing money to pay off our debt.
But in the end, price does dominate the proper course of action always.
I mean this with all respect but I believe that paragraph you wrote will only hurt your objectivity in trading. Only Price Pays!! Think about yourself and your family first, the government will continue to screw things up and cause frustration if you allow it to. Focus on your results and how you can do better in the markets. The market is not about academic theories but about economic realities.
Thank you Brian. Objective and clear. I will going forward take your advice. Thanks for your objectivity and clarity. Oh, and your gracious manner in providing your thought’s.