Line Your Own Pockets

Michael: 00:00

Okay, everyone. Welcome back to Line Your Own Pockets. Last episode, we brought you a special treat where we had our first interview with doctor Syed who, published a very interesting paper about social media and investing and and finfluencers and whether you should follow them or not. If you haven't checked that out, definitely make sure you do. That's great.

Michael: 00:20

Great episode. In this one, we're gonna talk about how we use social media or not use social media, which I think will be a funny discussion, and some ways that I think that if you don't find value in it before, you may find value in it, after I I give some ideas, maybe I'll convert Dave. But, first of all, Dave, I I kinda spoiled the the show is is what are your thoughts on on, a, the interview? I think it would be kinda cool to talk about for a second. And then, b, what what you use or or don't use social media for.

Dave: 00:56

Well, I think the interview should open a lot of people's eyes about how they're using social media, and you should definitely go back and listen to it. I mean, the the the money shot there is the more popular somebody is on social media, not only are they not worth following, but it's more profitable to do literally the opposite of what they say. So Yeah. And and it what struck me about this when I saw the paper is, you know, you and I do a lot of backtesting. We look at strategies all the time.

Dave: 01:35

And what's what you're struck with when you're backtesting is what you're looking for is something that's not random, and most stuff is just random. So if you have something that's that goes up into the right, that's good. If you had something that, you know, goes down into the right, that's good. Because either of those situations, you can exploit. So what I would expect to have seen in his paper was that influencers were just random.

Dave: 02:06

But, you know, this is a much more important finding than that. It's literally it it's literally that it's going down into the right. I mean, that's a crazy finding. So that should really make you stop and think about how you're using social media at all. Are you are you getting value out of it that you can apply to your trading?

Dave: 02:29

And when I looked at this and think about it a long time ago, the answer to me was absolutely not. And I think about that, I mean, across the board, social media, news, any you know, I basically ignore all those things. So I I don't know. We'll get more into this, but, yeah, tell me tell me what you think, Mark.

Michael: 02:53

So, yeah, I I love the interview. I I was kinda struck with the same thing you are where you're right. You we spend a lot of time hearing about idea, thinking about an idea, programming it into the back test or any back test, and just seeing the line chop up and down above and below profitable for, you know, days, weeks, months, years, whatever your back test time is. It doesn't you know, you could've you're better just to walk in, flip a coin, either buy this buy or sell this by and and close it at the end of the day. But to see that, yes, the large social media people are not only not good at it, but they are actively bad at it was, hilarious to me.

Michael: 03:30

And then that some small ones did okay, but it actually this is why I love doing this podcast with you. This is why I love thinking about this because I started to think about, okay, should I come up with some sort of system to feed these guys? I don't think that's the answer. I think the answer is and and what he talked about a lot is is you can start to see patterns with larger influencers, and a lot of it seemed to be, bandwagoning. Right?

Michael: 03:57

So all of a sudden, GameStop's in the news, and everyone's talking about it, and guys like me are even invited to CNBC to to give my take on it. And as soon as that occurs, you have all of these big influencers saying, if I start talking about GameStop, then I'm gonna get clicks and SEO and blah blah blah. And it's almost like the old shoeshine boy indicator or the odd slot indicator. For those who don't know, way back in the day, it was very rare for institutions because there wasn't all these algorithms. They would always put their orders through in round lots, like a 1000 shares, 2,000 shares, 10,000 shares.

Michael: 04:34

So one of the first big kind of quantitative systems out there was looking for people who put in dollar amounts instead of share amounts. So if the trade was 515 shares, they would look at that and say, that's not an institution. It's probably retail trader. It's less informed. We'll fade those.

Michael: 04:52

That made money for, you can correct my dates if I'm wrong, Dave, but I think that was really big in the seventies and, like, eighties and started to die out same around around the tech boom. Because like anything, the market's efficient and adapts. So large hedge funds said, why don't we just split up our orders randomly into these small numbers and and and destroy that? But, it makes me think that maybe there's a strategy in fading just these giant pops and and bandwidth. So I've actually started to work on some algorithms now that's just looking for, stocks with maybe poor fundamentals or or or junky type names that are up multiple days in a row and then looking for some sort of technical break.

Michael: 05:38

So it's very interesting that even though, you know, you're not taking a direct action based off of what you read in the study, like we talked about when we were talking about generating ideas. You never know what's gonna kinda break down the door and make you thinking about something in a different way.

Dave: 05:53

Yeah. That's interesting. That that would be the way to do it. Like, do some analysis where you're looking at this, like, have a big idea like you had and test and see, you know, figure out what you need to do to test your theory and see if there's any edge there or anything you can get from it. You know, this reminds me of how I think about indicators and news in general.

Dave: 06:18

I just don't look at them. The reason I don't is it's similar to the reason let me give you a little cycling analogy here. You know I'm a cyclist, avid cyclist. A lot of cyclists, when they just start cycling, you know, they're out on the road riding a bike. It seems it seems very vulnerable.

Dave: 06:43

A lot of them will get a mirror to put on their helmet, like a rearview mirror. K. You can look back and see what's behind you. And I've never been tempted to do that. First of all, because it looks goofy, and my fast, friends will definitely make fun of me.

Dave: 07:03

I think a couple of them listen to the podcast here. But the real main reason I don't do it is because there's literally no action I'm gonna take based on what I see in that rearview mirror. All the accidents like, there's very few accidents that occur when a when a car behind you just plows into a cyclist in front of them. And all the accidents occur in front of you. When somebody's crossing in front of you, they don't see you.

Dave: 07:35

So there's literally no action to take. So literally, the only thing you can do with the, you know, this input is make a mistake. So there's really no reason to have that there. And that's the same way that I treat news. That's the same way I treat indicators on my chart.

Dave: 07:55

If there's not some action that I can take that is gonna have a positive ROI for me, I'm gonna ignore it, and I'm just gonna remove it so I'm not tempted to do something stupid.

Michael: 08:10

That makes makes perfect sense. It's one of the reasons why, you know, for me, it's news. I'm gonna say it's the same thing. I'm not interested in news. It's, it is very much another analogy that I always like to I like to think of is, me and Dave are, fortunate or misfortune to know some flat earthers, I guess.

Michael: 08:32

And I've probably gotten into drunken debates with, with flat earthers. And, of course, you know, there are many very simple and logical ways to dispel this. But, eventually, at the end of the day, you go, okay. Well, so say you're right. Right?

Michael: 08:46

Yours is flat. I wake up tomorrow. What do I do? Right? I'm gonna use the same GPS system to get where I'm going.

Michael: 08:52

I'm gonna use all the same same metrics. And it's the same kind of thing where, if if you're using something in a way that it's just offering pure noise and and even worse, like, I I kinda like your example, and I'd go one step further, is that if you spend too much time looking in the rear view, you're probably going to I you could probably run the studies if you really did it. The people that doing that, just because of the split attention are probably gonna get in in more accidents. The, the counter I would make to something like social media is that these things can be designed to be used multiple ways. And, I always like the example.

Michael: 09:30

I forget the name of the documentary, but I highly recommend it. It's on, Netflix. It's and it's all about social media and basically how, you know, if if you fall into the trap, is this it's gonna ruin. You're basically battling a supercomputer for your attention. And the example that he gave was an old Steve Jobs quote that a he always thought the computer should be like a tool, which is like a bicycle that's, you know, lying in your in your living room against something and that you only go use it when you have a purpose for it and intention.

Michael: 09:59

I'm gonna go take it and then use it. Where social media news and everything, I think, becomes more harmful is when people either there's some addiction to it or there's some reliance on it. You know, someone's like, okay. Well, if, you know, follow my calls that I'm making here on Twitter and you're gonna make $1,000,000, it's like, well, first of all, based off this study, you're probably not. And then, also, what if you end up doing well trading with this person and that guy gets hit by a bus and you haven't learned anything in in that long run?

Michael: 10:30

So, there are, good parts. Like, I actually learned a lot of about trading and day trading, hanging out in some of these rooms with people, where it was, I'm not just gonna do what you say. I'm gonna watch what you're doing and then try to get some takeaways from that. But, yes, if it's a if it's a compulsion, if it's an addiction, then I think it's absolutely a problem. But my counter to Dave is gonna be, for idea generation.

Michael: 10:59

So let's let's just focus on, Twitter now because I think it was it was Stockpits that, the the study was made off of, but I think Twitter is a better example. So Twitter, you can either go on Twitter, and they've got 2 taps. They've got for you, which is some algorithmically designed nonsense to to upset you. The whole point of it is to to make you mad, and and, the longer you're on it, the the more mad you'll get. Yep.

Michael: 11:24

However, there's the the people I follow page. And for that, you get to go reach out to people who are like minded and and have similar ideas and interact with those people. So, you know, for example, I have one. I'm gonna actually shout out the extension. It's called social focus.

Michael: 11:42

I'm a Mac guy, so I have this on my iPhone, my iPad. It's a Safari extension. It's the only way I connect to social media where there's actually just tick boxes. I'm like, I don't wanna see the news recommendations. I don't wanna see the for you page.

Michael: 11:56

I only wanna see the the feed of my my friends and and people I'm interested in. So my counter on using social media would be, why don't we use social media in a way that we can generate ideas? So go find people out there that are interested. So, for example, a couple of the people that I follow are systematic traders who share back tested strategies on or substack articles, thing things that they're writing, that I enjoy reading and interacting with and and chatting with them to generate ideas. Doesn't mean I'm just gonna this guy's gonna say, listen.

Michael: 12:31

I made this back test, and I'm just gonna follow it and and do that. But for that idea generation so that's kind of my counter to you, Dave, is is if we're gonna use social media, Tony, you think that's a great way to do it?

Dave: 12:43

Yeah. I think that is a great way to do it. But have a purpose for it. I think you're totally right. The for you section, yeah, just ignore that.

Dave: 12:51

You you should be curating this and have a purpose behind it. Yeah. So it reminds me of a quote here from William Blake that my wife sent me. It says, I must create a system or be enslaved by another man's. So I think about this quote a lot because, you know, I feel like you're on like, it's very tempting to look at what other people do on Twitter, people posting their p and l, posting charts, posting their recommendations, and sort of have some insecurity about what you're doing.

Dave: 13:30

Okay. Maybe I should be doing what they're doing. Mhmm. That's a slippery slope, and you need to think about how to fully internalize and fully take responsibility for your trading. And that is you know, of all the traders I've worked with, it's a it's a common theme.

Dave: 13:50

The traders that fully internalize and fully take responsibility for their own trading, those are the ones that are successful. And when you get to that point, that is the inflection point when you, you start to become successful. So it's a critical way to that I I think about that all the time, and it's a slippery slope when it comes to the social media because you're you're what you said earlier, your attention your attention is so valuable. And to have be distracted by something where it's an increasingly it's gonna continue to grab more and more your of your attention if you're not careful. It's dangerous.

Michael: 14:30

Well, I think and I also think, when you're curating, people to look at is a, I I liked what you mentioned. That was a banger quote. We gotta write that down somewhere. Yeah. I also like there's, Jack O'Willock, who's, an old Navy.

Michael: 14:46

He's what discipline equals freedom. I love that one. It's the same kind of thing. And, comparison is the thief of joy. I really like that one too.

Michael: 14:54

And and that's right. So when you're going through and this is why, again, I like you can systematize. Like, I've systematized my social media. The that those short videos that happen on YouTube with this extension, I don't see those those 32nd videos. I'm not interested in those.

Michael: 15:10

But what I am interested in is if someone's giving a talk about, there was a gentleman that I saw who's a fellow CMT who gave a, a volume adjusted MACD indicator and some back tests that he ran with it. And it's like this is like a 2 hour long presentation. That interests me. I'm gonna sit down. I'm gonna watch that, but I don't need to see a 30 second video of some kid in their Lambo.

Michael: 15:31

So that's the the first kind of curation that you can do is, are these people that are are of some repute and and they have some, you know, kind of weight behind them? And are they talking about realistic things? Like, here's a little tweak you can make. Here's a system that I run. A couple sub stacks that I I read that talk about these kind of quotes.

Michael: 15:51

I think that's fantastic. And then, also, are these people that you'd want to interact with? You know, is it someone that, you know, they post a back test and then you could post question, they're gonna respond to that question. You could have a back and forth in a conversation. I think that's great.

Michael: 16:04

So I think the format of it, I would say that, one of the big things that I always look for in social media is nothing in the world happens in, like, a 32nd clip in in the real world. Just nothing. So if you show me a 32nd clip of anything, I'm I'm not interested, whether it's, you know, a politician or a science thing or or or a trade. If you show me a single trade on a 32nd clip, I'm I'm not interested. So I always look for, like, seek longer form content articles and things like this as opposed to shorter form content.

Michael: 16:34

That was something else that actually came up in the conversation. I think it was Seeking Alpha. He said that there was some edge to the articles there as opposed to this anti edge from social media. So, yeah, look for people who, a, the 2 things I was thinking of for following, a, anyone who speaks in absolutes is an immediate no follow. Right?

Michael: 16:55

Gold is going to go up. Right? This is going to go down. That's as soon as you do that, it's like a a mute or an unfollow, because you don't know. No one knows.

Michael: 17:03

Right? You could say, hey. I've done this technical analysis, and I believe that there's a better chance or good risk reward trade that this is gonna happen. Great. And then also, it is it very short form content, or is it long form content?

Michael: 17:17

I think that that's different. I think there's brain mechanics stuff that happens there as well.

Dave: 17:23

Yeah. I agree. So it kinda reminds me as you were talking about politics and this have you ever come across or it seems like a very pretty common thing that I run into. I'm talking to really smart people about various things, some topic, and we're having a great conversation. All of a sudden, the topic goes to politics, and all of a sudden, they sound really dumb and, like, they're off their rocker.

Dave: 17:53

So it it there is something about politics and news that makes you dumber, like, in its instant. So I I think about that a lot. Like, I don't want to delve into that world. Just I I don't I don't wanna be dumber, and it does seem like it just makes people dumb.

Michael: 18:12

Well, I think it's, I think it's tribalism, and I think it's, it's emotion. Right? As soon as you get, emotional about anything, a lot of your logical receptors just kind of shut out. Right? And it's like, I like this particular politician.

Michael: 18:26

And, again, I'm Canadian, so I don't I I intentionally don't follow your guys' politics. We had our own stuff to worry about. I'm not concerned with yours. But as soon as you're in one category, you there's a lock in effect there. And I think that kind of occurs a little bit with trading too, where someone will say, you know, I've spoken to people who were like, I'm a growth investor.

Michael: 18:50

I invest in big tech names. And I I do a lot of these Twitter spaces where I talk to these people. And I remember having a back and forth with 1 gentleman for a while. I go, why? Right?

Michael: 18:59

Because I'm talking about, you know, a gold trade I have on and a natural gas trade I have on and and these type of things. And he's like, oh, yeah. But I don't I don't look at that stuff. I'm I'm only a growth investor for, you know, big cap. And I'm like, what if we go through a 10 year stent where, you know, big cap tech doesn't do anything, and then all of a sudden you have these other sectors.

Michael: 19:19

And, so I think lock in of of any degree, and I think that's one of the reasons why I'm very much against everyone who speaks in app absolutes. Because as soon as you out there, publicly lock yourself into I am a bot, then there's a whole bunch of baggage that gets locked in there as well. So I filter I filter that, and I I I do filter by politics. I got a I got a 2 strike rule. So if I'm scrolling through and I see that someone mentioned something, then it's out.

Michael: 19:49

And that's again, the beauty that I I see is that, if you go through my Twitter feed, there's, like, some exercise stuff. There's, you know, 99% trading stuff. And then if I see anything that's a little bit off, sometimes I do it begrudgingly. Maybe I actually like most of the content that this person puts out, but I'm like, it's just too much of this thing. And what I'll do is instead of unfollowing, because then I if I wanna see them again, I gotta follow them back, is the mute button.

Michael: 20:18

I think the mute button is fantastic. Nobody knows that you muted them. You just don't see them anymore. So there's I've got a whole bunch of people that I've muted that I bet you it's November, I think, is your guys' election down there. Yeah.

Michael: 20:31

So I think December, January, I'll probably go through that list and maybe unmute them and kinda give everyone a mulligan. But, yeah, it it's just make sure like you mentioned, make sure that it's it's working for you. I have a very curated list, and I just don't see the other stuff, so I don't have to think about it.

Dave: 20:48

Yeah. Hey. And as soon as you, I like what you're saying about, you know, people having an identity as a certain type of trader. Yeah. That's not great because it's gonna be harder for you to change over time if you have said that.

Dave: 21:04

And when you post stuff on social media, you're putting that in the public, so it's gonna be a little harder for you to change. And and that's something definitely to keep in mind. There's another quote that I wanna quote here from Mike Belafore.

Michael: 21:18

Mhmm.

Dave: 21:20

Does he says, networking is a trading skill. And I think that's a lot of what we're talking about here and how to use social media in the right way, and that's to meet other like minded people. A lot of, you know, a lot of the improvements you'll have as a trader over time are through interactions with other people. Hearing what other people think about what you're doing, their thoughts on a strategy or something adjacent to what you're doing that you it might be very similar to what you're thinking about, but it may take years before you come up with that idea. So any sort of collaboration you have as a trader is great for you in the long run.

Michael: 22:06

I I think we're just like old men spitting out quotes at this time, but, one that I love as well is is to keep an open mind, but not so open that your brain falls out. And I think that's a a good message for social media as well. I want to again, I have a curated list, and I'll add people to that list if they get retweeted by other people and stuff like this. But, so I'm always interested to add more people at list. But everything everyone says, I'm just instantly skeptical of until I do some sort of testing or I see some sort of data that that I think is legitimate from their hands.

Michael: 22:38

So, again, make sure, yeah, you're you're constantly expanding this horizon you have of different people because you're right. You never know when that next great idea is coming. But always understand that, you know, they may have different risk tolerances, goals, right, capital that they have access to, many different things. Even if they're a perfectly good actor, there just may be things that are are outside, your control. And then it's also that, you know, they might not be a good actor.

Michael: 23:07

And some of them out there aren't going to, you know, the, for our case, there may be a back test. There was a a blog that I was following for a while that I won't mention. And because I thought it was interesting. They were putting out all these constant back tested systems. And then it was both 2 or 3 posts after seeing them.

Michael: 23:25

I noticed they were the their whole time was always, like, a year, and it was always only tested on the S and P 500. And, you know, so then I went through and I said, well, do these guys talk about anything else? And it was no. There's all these back test systems on how you can beat the S and P 500 in the long run just with the S and P 500. I'm like, well, so you you know, for some people, that might actually be a fine thing to look at these different strategies.

Michael: 23:48

For myself, it it doesn't matter because it's like you've picked an instrument that 75% of the time, if you pick any point in history and you go out a year, 75% of the time the market's up. So, of course, all of your strategies have these amazing win rates. But, you know and I I don't even need to know whether or not that is purposeful to sell things or whether it's just they haven't gotten to the point where they've introspectively looked at that. But I, you know, I let them in. I read a couple of their things, but I didn't, you know, follow anything too closely until I kind of really critically looked at it and then, you know, let them back out again.

Michael: 24:24

We'll say we'll use that.

Dave: 24:25

Yeah. Yeah. I think, maybe we'll have to do another episode on, the quantitative approach to processing news or having a way to actually incorporate news or social media social media into a strategy. I think there's a couple different ways you could do it, and I, you know, I think it'd be good to talk about a systematic approach to doing that.

Michael: 24:54

Yeah. I think that'd be great. I'm very interested. You gotta remember, everything out there that you do is is a data source. Right?

Michael: 25:00

Everything out there is a different, a different data source. The the ideas that I got from that interview about social media, there might be more from that. I have to edit it late later this week by it'll be out by the time you guys are seeing this, obviously. So I'll be watching it through again. There might be another couple ideas that pop up.

Michael: 25:18

But, yes, you've gotta be you've gotta be mindful about social media like anything else. Right? I I kinda look at it as like, you know, I like to go to the pub and talk to my friends. I can't go to the pub every night and talk to my friends, or I'll be drinking way too much beer and eating way too much garbage, and I'll I'll they'll probably annoy me by then. And it's the same with social media.

Michael: 25:38

I have very specific at the end of the day, I'll post couple charts and and my thoughts in the market. So I use it as I generate a lot of content with podcasts and YouTube and things like that. And while I'm there, I'll consume that content. But between those parts, I I don't even look. So, be purposeful, you know, use extensions, use blockers, all that kind of stuff, and then, you know, schedule your time.

Michael: 26:03

If you're one of those people that you pick up the phone every or pick up your phone every 2 seconds and the first thing you click on is Twitter or any so pick pick your poison, then that's where I think a lot of the problems occur.

Dave: 26:14

Yeah. I think I keep going back to something we've mentioned on this podcast a lot of times, and that's, you know, you should be honing your BS detector all the time. And that's your you know, I think about the BS detector is another word I use for, you know, your process of testing ideas. And, there's certainly a way you could, you know, use social media to gather ideas like we've talked about earlier. And, you know, the the more honed your process is for testing them, the quicker you can do that, you know, the better off you'll be.

Dave: 26:54

And you could use some of these sources for doing that, for, you know, testing new ideas and coming up with new ideas.

Michael: 27:02

Yeah. So, yeah, that's that's the big thing is right. There's a lot of people out there that are sharing good stuff, but it's it's the needle in the haystack. Right? It's the whole thing that, you know, getting into, like, philosophical whatever.

Michael: 27:18

But people initially believe that if you gave everyone every piece of human knowledge that ever existed in their in their pockets, everyone would become way wiser. But that makes the assumption that humans are truth seeking machines, where really humans are comfort seeking machines. So they they seek out things that make them feel good regardless of whether or not they're the truth. So, like, Dave was talking about your BS detector could also just be, am I approaching this with any kind of bias? Am I approaching this as somebody who is trying to be a truth seeking machine?

Michael: 27:48

And the only way to do that is to, again, really know the person who's putting out. There's, you know, some people out there that as soon as they put something out, I know that it's there's been a certain amount of diligence that's been done, and I can you know, if I went and looked at the charts myself, I would see the same things, or testing it yourself. There is really nothing that that is better than than doing that yourself. And then lastly is is have have fun with the social media. I don't know what what happened from, you know, the in initial days of Twitter is like, hey.

Michael: 28:18

I went to this coffee shop, and this was great. And I had this caught, and then this coffee was amazing. And now it's like everybody hates everything and everybody all the time. So, like anything is that at the end of the day, you have to look at it and say, did this add value as in, you know, do I generate a new idea that I can test over time, or did I have fun with it? If I didn't do either of those things, then what the hell am I using it for?

Michael: 28:43

Right?

Dave: 28:44

Yeah. I mean, it's, news, politics, social media, a lot of that ends up boiling down to just being entertainment. And, you know, there are lots of different sources for entertainment, and I think it's useful to think about those in that way and keep that in the entertainment bucket and not the this is my life bucket.

Michael: 29:10

Yep. Alright. Well, that was cool. Again, I think we could have an I'm I'm excited for what you're gonna come up with for other ways we could use and and apply that data to our testing. I think that's fantastic.

Michael: 29:23

I've always thought an oscillator based off of rocket emojis would be super fun to watch. You just scrub the data. The more rocket emojis it gets to a certain point, you short the stock. No rocket emojis is probably a good buy. I always thought that'd be fun, but there's definitely some ways we can do about it.

Michael: 29:39

So, any parting thoughts?

Dave: 29:43

I think that's it. I think we've covered everything we wanna cover. Look for looking forward to next week already.

Michael: 29:49

Awesome. Well, yeah, as always, I I'm I'm having a lot of fun with this. I hope the audience is well. We're getting a lot of feedback that's positive. We like it, and that encourages us to keep going.

Michael: 29:59

So, we appreciate everyone that's doing that. Thank you guys for tuning in. I'll talk to you next week.

Dave: 30:05

See you next week.