Now that I have your attention…

I’ve always wondered how prices in the financial markets change..How those numbers turn green and then red and then green again…how do people, or rather the “markets”, make their decisions? I mean, they’d have to hear something, some news, some secret, some rumour, that would make them want to go long instead of short or the opposite or something else…But where does that information come from? And how do they manage all this information? How do they sift through the info, discarding the unreliable ones? This task of succesfully navigating the ocean of information is what I have found aweinspiring, and a little intimidating…

Well… I think I have a small idea of how it works. To my mind, there are two types of investors: The “Buffets: and the “Everyone else”… The former group study companies’ financial reports, analyzes markets and the whole 9 yards…that’s what they do full time, probably longer hours than the typical 9-5…

The latter group to which I belong,on the other hand, more generally follow trends and sentiments…At best, they would know some chart analysis (for which one can refer to this site called StockCharts), would follow the news somewhat closely or would have a “Buffet” type friend whom they follow…But that’s pretty much it…I think.

Most people tend to make buy/sell/hold decisions based on how they perceive the world, not based on any concrete info that suggests what they should do…In a way, it’s like democracy: everybody’s got an opinion, but only a few of those opinions actually stand the test of reason…

I say this based on my own experience trying to follow the news on Corn/Wheat/Soybeans…I spend an average of 1 to 2 hours a day going through the news. Sure, the first article is new; the 2nd one has an interesting argument…but by the time you read the 10th one you realize that it’s the first article rewritten differently…now if you do this everyday, you are not very likely to learn something substantially new that would motivate you to change your buy/sell/hold decision… (except certain days when financial reports are released or things of that nature)…

So why do those financial tickers change? What makes them go up and down, green and red when there isn’t that much change in information? Well, I think those decisions are similar to decisions people make about what to Tweet or what to put as their FB status. Just like FB/Twitter, a good majority of those posts/decisions are random, spur-of-the moment kinda thing…

Don’t get me wrong, it’s still important to follow the news. But surely there has to be a difference between the information available to you and me and the information that Buffet-types would get their hands on…that’s why they are paid the big bucks…