Reflections on Thinking Critically

I first learned to think in 1952. Prior to that time, I was taught using the dogmatic rote and repetition of a religious school until I was fifteen. In 1952, my Dad was transferred to Florida and I entered a public high school (good old Leon High in Tallahassee) for the first time. I felt like I had walked from the darkest mental dungeon into sun shine for the first time in my educational life!

The key that eventually opened the door to critical thinking for me was turned by my freshman English teacher - a Mrs. French, believe it or not (bless her sweet progressive soul!). Our class was paired off two on two in a spelling contest. The class winner got a two paid tickets to the local drive-in. (She didn't offer incentives of this sort often - so this was "special").

My opponent was a young lady who, in my opinion, was much more intelligent (and beautiful to boot!) than I. I, in turn, (whine, whine) complained to Mrs. French that I could not possibly win against such superior competition.

Mrs. French, who had composed the word lists to be used, for some reason (for which I'll remember her fondly forever) then told me to examine the list and see if I could find something with a dual meaning and differing pronunciation. 'Lo and behold, a bit of research yielded the word "minute". Minute (minit) meaning a short period of time and minute ( mi-nute) meaning very, very small.

The first word I gave to my opponent was minute (I pronounced it mi-nute) causing an immediate, near tearful wail that I was giving out a word that was not on the list.

Needless to say, on the power of that one word, the upset of missing it (she did!) and the insight provided by a true teacher, I won the match and learned how to think. A tiny insignificant thing, you say and probably true, but as time passed, I taught myself to consciously look at both problems and "facts" from as many different directions as I could conceive of.

This has stood me in good stead for the entirety of my life. It helps me to this day sift the trash to see if there are any treasures therein and helps me to know what to (conditionally) believe, subject to further evidence, about most happenings in this world where there are more than one side to an argument. Which is almost everything!

Take, for example, global warming. Just because 2010 (so far this year) has been the hottest year worldwide since records began in the mid-19th century and 2009 held the record until this year and 7 out of the hottest years ever recorded have been so recorded in the past ten years does not global warming make. A frigid Winter in the Northeast quadrant of the country in 2009-2010 does not disprove anthropogenic global warming either.

What counts is not the waxing and waning of daily, weekly or a single season's temperatures but the trend of earth's temperature over much longer periods of time such as thousands and hundred's of thousands of years. The facts do show, from broad and reliable sources, that the earth is now warmer than at any time in the past 800,000 years (the last ice age ending only 11,000 years ago). This pretty much pins the tail to the climate donkey and says, "Humans, you are in deep tropical doo-doo no matter what steps you take to reduce CO2 or any other greenhouse gas for the next few hundred years no matter what! And we are. And my great-grandchildren and their children will have to figure out a way to live with it. The probability of global agreement on anything is nil. Total disaster and mass starvation will be the order of the day before we humans even start seriously talking about how to live with a new climate - much less do anything about it.

The world markets are very like the climate - running hot, cold, stormy, calm, an occasional tornado and blown about by politics, economics (as interpreted by hundreds of gurus) and the human condition. It just moves a lot faster than the climate and consequently needs different kinds of data on a shorter time sale to judge what's going on. Up? Down? Crash? New Bull? New Bear? Stagnant? Dynamic?

Some "forecasters" depend on long term cycles (of their own proprietary composition) to predict the unpredictable. Some value the fundamentals of market analysis which, as we have recently seen, can be very misleading through unethical and dishonest ratings of securities and inaccurate self-serving accounting practices on the part of corporations. Many subjectively value the market and invest on gut feelings or intuition or "tips" which is a guaranteed path to penury for those who do it. There are as many "systems", "secrets", "forecasts" and other voodoo methodology out there as there are people seeking to invest their money and make a profit doing it (and willing to pay for the mostly bogus information).

The secret here is to be able to evaluate what works and what doesn't, what's true and what isn't, what's logically correct and what's loonie tunes.

First off, nothing works well all the time. Doesn't happen, never has happened, never will happen. I view the financial markets of world as a huge Ouija Board with investors from individuals to banks to hedge funds all resting their usually greedy hands on it, some perhaps attempting to influence the outcome, some along for the ride to see which way it goes. Being as markets are more de-coupled than they used to be (or beginning to be so), it tends to be stacks of Ouija Boards, loosely connected in a pile so that one can also influence the others in the grouping as well. It is not necessarily the case that when the United States market has a bad day (week,month, year) the rest of world's markets do worse. We, as a country, are a fading superpower, mired in unrepayable debt, bound hand and foot by ever increasing government ties and faced with developing new superpowers that must, somehow be dealt with.

The only exception to our (so far) failing economic and dying productive strength being the military/industrial complex of America which is another reflexion article altogether.

Overall, this provides a problem with so many variables, so many influencing and conflicting factors, so many people and institutions involved that there never will be a "system" that will enable you, the individual investor, the capability to predict what is going to happen in the markets. It's like going to Las Vegas and betting Red on every roll of the ball. You'll win slightly less than 50% of the time in a long run of bets because the "00" is the house edge and you can't beat it. Wall Street, in spite of the "new regulations" to "protect us" (doesn't the government always use that asinine statement to justify ways to take away our freedoms?) has dozens of "00" slots in its Ouija Board to siphon investor's money away and there are very few ethics and little honesty in either the banking monopolies or Wall St. in general. They have a stake in using your money to make money for themselves, delivering to you the minimum amount they feel will keep you putting more in the game. Bear this in mind, just as brokers tend to be "johnny two notes" wanting you to buy-sell-buy-sell as they make their money by moving yours around, profiting from each transaction (they do but you might not!).

That's why I developed the MRO, Market Reversal Oscillator, It makes no attempt to predict anything. It just takes the data that reflects what is actually happening, calculates mathematically what everyone else is doing and jumps on (or off) the bandwagon to take advantage of trends and momentum of crowds regardless of what it is.

To assist you in the ever more difficult process of figuring out what's the truth (reality) and what's not (fantasy or illogic), I would like to make a recommendation to all of FSO's readers.

Read and study the following book:

"Lies, Damned Lies, and Science", by Sherry Seethaler,2009, FT Press (available on Amazon)

Don't let the "Science" in the book title deter you - just substitute "Stock Market" or "Politics" or "Economics" or any other subject for the word "science" and the book is every bit as valuable to use to assist you in sifting that diamond from trash on any subject that happens to come along. It will teach you to think critically and from many viewpoints and will show you how to evaluate any "fact" regardless of subject. It's one of the best "thinking" books I've had the pleasure of reading (and re-reading).

Make no mistake, it is not an easy book to read nor one that is intuitive in it's message. It has tremendous valuable content and because the subject is not simple, neither is getting the information out of it. You will find it well worth your while to study.

NOTE: Full disclosure: Mike Endres and Market Trend Trader have no financial interest in the sale of this book.

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The Market Trend Trader is the exclusive source of the MRO (Market Reversal Oscillator) trading system. Please feel free to contact the author for further information on the MRO or to discuss this article.

mendres@atlantic.net

352-343-7245