More Market Worries: 'The Only Three Questions That Count'

by: Jeff Miller

There is an important observation from a great source, Daily Speculations by Victor Niederhoffer, Laurel Kenner, and their team. This is on our list of regular reads, with a bombardment of stimulating ideas, but thanks to Charles Kirk for highlighting a very interesting post we had not yet seen (as he does so often).

Review of Ken Fisher's Book

Victor has a number of criticisms of the much-publicized Fisher book, The Only Three Questions That Count. Readers should check out his review. This is on our (growing) list of books to review, so we have no comment at this point, beyond our general respect for Fisher's results.

Here is Victor's nomination for the single best point in the book:

As a final positive note, one thing that Ken Fisher claims in his book that sounds true to me, is that any fear that is widely broadcasted in advance will have no impact on the market. Or perhaps in more predictive terms, to the extent it's influencing the market, it creates a bullish situation because it's already encapped by the price, then price will increase when the fear subsides. Fisher gives many examples to carry his point, and if it weren't so hard to quantify this, and there weren't so many highways and byways to tie down, this would be a very good thing to study.

I feel that this point is highly relevant to sub-prime, and also to the asset seizure on the brokerage house that is famous for seizing the assets of its own customers (how ironic).

How Timely

This observation is extremely timely. In a few words, Victor made the point we were reaching for yesterday. It is difficult to quantify what worries are already reflected in the market. A good starting point is for investors to ask, when reading the umpteenth article on sub-prime lending or hedge fund problems or spent-up consumers, or housing market problems, whether this seems like new information.

Here is a clue: If the writer calls it "sub-slime" or a "meltdown" or "parabolic," one must evaluate the rhetorical flourish. Those invoking symbolism instead of writing objectively frequently have an agenda that the reader should understand.