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5.0 out of 5 stars
A hidden gem, June 26, 2011
Perhaps Dickson G. Watts, former president of the New York Cotton Exchange, put it best when he said, "Teach men to navigate life's seas as you teach a young boy to swim: put your hand under him and then gently, slowly remove it." In 'The Ruminator' Neill introduces the reader to the overstated but often misappropriated field of contrarian trading; doling observations along the way with the subtle ambiguity and wisdom of an individual who guides without imposing on the reader's thought process.
To the uninitiated, there are no in-depth trade analyses or financial charts unlike his more popular
Tape Reading and Market Tactics: The Three Steps to Successful Stock Trading. The best way to describe the book is a financial interpretation of Gustav Le Bon's '
The Crowd: A Study of the Popular Mind' I believe that Le Bon's text was an extremely influential sources for Neill and worth a complete read on its own I might add. As a result, 'The Ruminator' specfically, seeks to understanding how financial crowds succumb to emotions and how one can attempt to remain logical. One focal point touched on early in the book, is perhaps the largest misunderstanding of Contrarian trading in my opinion: its application.
A common misconception of contrarian thinking is that the point of if all is to buy when no one else wants to. However, the true essence of being contrarian is to think when no one else feels the need to, and to remain logical when those around you succumb to emotions.
While it is easy to assume that thinking will automatically make you a contrarian, it is worth noting that there is not a conscious effort on the crowd's behalf to absolve themselves from thinking logically and throw caution and portfolio to the wind. As stated in the book, often individuals start off with a small but growing respect/interest for a skilled member or an authority figure in said community, but soon mild-mannered mimickery turns into a monetarily backed instance of 'monkey-see monkey-do.'
This affects everyone, regardless of skill level. In today's financial world the uneducated retail trader likely follows media pundits like Jim Cramer and the recommendations of their brokerage. The 'educated' retail trader might pay attention to the always vocal members of PIMCO such as Mohamed El Erian and Bill Gross. The older members on the professional side of the market might pay special attention to the latest edition of the Gartman Letter, while the younger professional traders might be focusing on what the latest Technical Analysis tool has specified.
Neill also questions the media: not the cliched, 'big brother' conspiratorial manner, but moreso as an observation in the Don DeLillo sense, that a (perhaps unintended) side-effect of the media is an uneducated consensus. The media's message often lack diversity and Neill states that, "When writers write alike, readers are likely to think alike as well." which is a concise yet powerful statement.
The media lacks foresight and substance because headlines sell papers instead of logic and facts. Crowds search for evidence to confirm their beliefs and the media writes solely to capture the attention of the public and validates the crowds' thought process. The question of whether the media compels the public to think alike or the public compels the media to write alike is an interesting causality dilemma but I digress.
Neill draws from a variety of sources in the book, from military strategists and sociologist to political studies and philosophers. It is an excellent read with shades of post modern thinking throughout.
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