Reading a very interesting book called "When Markets Collide" written by PIMCO's co-CIO Mohamed El-Erian. I'm only about less than half way through it and i realize how naive i have been in interpreting news, events and data over the past 2 years. The author encourages us to adopt a flexible 'thinking model' and asked us to learn how to interpret noise in the market. Btw, the book is up against Snowball in the FT/Goldman Sachs Business Book of the year award.
In a world of cyclical change, the way to deal with noise is largely to fade it and treat it as temporary and reversible. However, the author suggests that the current instability in the market suggests a longer term secular change in the financial market. Inconsistencies in the bond and equity market last year (a inverse yield curve and a rising stock market) and developing states being the largest creditor to the industrial world suggests that the there could be large developing change in the economic landscape.
I'm reading it i immediately realized that i have been FAR too willing to accept the idea that "this too shall pass" and too quick to dismiss the notion that "this time is different". When reality contradicts my previous belief, i got stuck in the world of poorly developed misconceptions instead of going all out to explore and learn new ideas. I shall not succumb to hubris at such a young age. I shall be fearless in learning new ideas and be ruthless in destroying cherished opinions. Principles towards investing stay (ie long term and value oriented), but my attitude must improve.
The difficulty lies not in the new ideas, but in escaping from the old ones, which ramify, for those brought up as most of us have been, into every corner of our minds.
John Maynard Keynes
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