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Why Zero Hedge Can Be Bad For Your Financial Intelligence

By Lawrence  

Today, traders and investors just know that Zero Hedge is an important source of financial information. What many of them do not realize, is that five years ago, the site was just a cult name among the active traders. The information presented back then was unique and often leading. It is probably the best source for financial information back then. But is it still the same old Zero Hedge we traders can’t live without?

Zero Hedge Is Now Mainstream

If I say Zero Hedge is mainstream, you probably think that I am insane. Well, its traffic stats won’t lie. Just take a look at the Quantcast visitors chart below.

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Ever since the explosion in number of visitors back in year 2011, Zero Hedge has been one of the top websites in the world consistently.

According to Alexa, Zero Hedge is now one of the top 2000 websites in the world. It is also within the top 1000 websites in United States. How alternative can it be when it is among the most visited websites in the world?

So what? You may ask if you choose not to think critically what this implies.

Whatever information Zero Hedge may release to the public, it is now read by so many people and related to so many other people that the opinion of the reports will become the opinion of these readers. When there are enough people accepting the point of view from Zero Hedge, the view becomes mainstream.

Relative Ranking

Many people may find that Zero Hedge propelled to Alexa top 2000 is not that impressive. After all, there are 2000 companies in the list. Alexa ranking is also not that accurate since it depends on the use of the Alexa toolbar on the browsers to collect the visitor statistics, according to Amazon (the parent company of Alexa).

Well, it is all a manner of perspective.

Here is a list of the well known financial websites ranked by Alexa (as of May 27, 2014):

# Name Rank
1 CNN 57
2 New York Times 125
3 Forbes 157
4 Wall Street Journal 219
5 Reuters 269
6 Washington Post 304
7 Bloomberg 361
8 Market Watch 565
9 CNBC 640
10 Business Week (1) 856
11 SeekingAlpha 920
12 Financial Times 1044
13 Zero Hedge 1361
14 The Economist 1758
15 ilsole24ore.com 1988
16 TheStreet.com 2476
17 StockTwits.com 5123
18 Barron’s 8467
19 RTTNews.com 38111
20 eFinancialNews.com (2) 60130
21 TradingMarkets.com (3) 67186

Notes:

(1) Business Week is a Bloomberg company

(2) eFinancialNews.com is owned by Dow Jones

(3) TradingMarkets.com was the poster boy before 2010. Since then it has fallen into unimportance.

 

From the table above it is very clear that Zero Hedge has achieved something not even big money can accomplish over the past few years. Namely, it is now one of the top financial news websites in the world for real. There is no doubt its influence has surpassed many household names including The Economist, TheStreet.com and Barron’s.

Contrarian Opinion No More

Zero Hedge was famous for its contrarian view against the mainstream media before 2010. Now that people has accepted the point of view from Zero Hedge in so many issues, it is no longer the place to offer good contrarian information. Yet, many people who read Zero Hedge thought that they are reading a cult website with limited number of followers. It is the way the site carry itself and the articles published there which often present themselves as contrarians that make the readers of the site having this warm fuzzy feeling of finding a place to meet like minded people.

The main point of views dominating at Zero Hedge right now are more often losing propositions than not. This is in stark contrast to what the site used to offer its readers before 2010. Well, this is not the fault of Zero Hedge itself because the Tylers (There are a number of them posting under the handler Tyler) of Zero Hedge usually focus on current events and latest news. Thus the postings are often limited to short term market conditions.

There is, however, the problem of the guest posts. Many of these guest posts somehow fixated on certain issues and never chance their point of view no matter what happened in the markets they are discussing. It is as if these people are frozen in time and are completely detached from reality.

Following are a few examples illustrating the problem.

Gold To Go Higher

This theme has been beaten to death by the gold bugs infesting Zero Hedge for a long time.

Ever since gold moved higher from 1500 to 1700, many of these guest posts never even talked about selling gold or shorting gold at all. Flooded at Zero Hedge are fear mongering posts that the world will be destroyed and that gold will be the only thing that worth holding on to. They always call people to buy the dip when gold pretty much collapsed from 1500 to 1200.

I know, people who believe these long-term opinions (can we really call them long-term when we know there is really no term?) have no one else to blame but themselves. Believing gold is the only thing left worth holding onto in case of world apocalypse is very ignorant. But that is not the point.

The point is that some of these opinion pieces are not only bad trading ideas. They are also bad analysis with agenda attached.

Stock Market Overbought

The stock market overbought theme is another one that somehow keep recurring.

So many posts at Zero Hedge claiming the stock markets are overbought, they pretty much work like spells or hypnotizing treatments on all those people who are not equipped to analysis the stock markets themselves. Given enough exposure to these readings, normal people will be nudged towards fearful of the stock markets around the world.

The truth is that, as a whole, there is no such thing as overbought or oversold in stock markets. If one has to define them, stock market is always overbought because proper valuation of stocks based on disaster valuation is always at or near zero. I’ve talked about this before and there is no point in wasting time here to go into lengthy discussion on the subject.

The most important thing to remember is that stocks are just convenient money parking instrument with inflation hedging property. In other words, stocks are just a function of money flow – nothing more, nothing less.

The Market Is Wrong

Many contributors at Zero Hedge love to tell the readers that the market is wrong. They use it when the markets are not doing what they think the markets will do. Simply put, their weather forecasts fail so they blame the sky for not following their forecast methods.

The price movements in a market is just the aggregated activities of the participants expressing their opinions. A market can move whatever way it likes. There is no certainty in any markets.

Obviously, since majority of people who trade lose money, the loser feeling binds these people together well when they read these blame shifting posts at Zero Hedge.

As a trader your job is to make money, not blaming the markets you trade for not giving you a profit. Own the responsibility to your trading losses is first step towards seeing the addictive nature of blaming others for your failures. It is not easy to do but necessary if you want to make money trading.

Zero Hedge Is Still A Good News Outlet

In summary, I am not saying Zero Hedge does not worth reading. In fact, I browse thru Zero Hedge almost everyday. I also use aggregating software to track several news sources and Zero Hedge at Twitter is one of them. Zero Hedge is still useful but not in the original way when it was a special niche website.

The way we used to use Zero Hedge long time ago, like jumping on board certain stocks for their pending breaking news, no longer work.

The opinion pieces posted at Zero Hedge that are written as if they are carrying contrarian messages are no longer contrarian.

But Zero Hedge is still the fastest outlet in bring us news that often have impact on the global markets. That I have to say thanks to all the Tylers working hard at Zero Hedge in making it happen. I find it fascinating on how they do it while trading.

Zero Hedge is now mainstream. Being mainstream comes with whole package of bias opinions and agenda driven content. In other words, Zero Hedge is now just another source of financial news and we should treat it as such.

Read it with a healthy dose of skepticism will protect your financial intelligence from degenerating.

Sources

Zero Hedge

Zero Hedge at Twitter

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