Market Musings: Tips are for Waiters

Yesterday, I was struggling to find a topic for today’s Market Musings. Then I decided to look through my prior Market Musings to see what I’ve written about in the past to see if I could find any ideas because I’m trying to publish a new post every morning. Then I stumbled across a phrase in my second Market Musings post, State of the Markets, where I used this phrase, tips are for waiters. It comes from Jim Cramer’s book Real Money, that is the one investing book of Jim’s I would recommend. In Real Money, Jim describes his Ten Commandments of Trading which are simple no frills investing rules I’ve used over the years.

One of my favorite commandments are, Tips are for waiters. I’ve used this line a number of times because whenever you meet someone who realizes you work in the markets they usually ask your opinion on certain stocks, about market in general, or offer their own hot tip. Most of these people have no idea what I know or didn’t know, but they probably wouldn’t think twice about buying something I recommended. That’s coming from me and I really have no idea where the market is going or what stocks will outperform.  If I did I wouldn’t be writing this blog because I’d be to busy swimming Scrooge McDuck style in my pool of gold.

The truth is that most of the people, even the majority of guys managing your 401k dollars, have no idea where the market is going.  Unless you have insider information, there is nobody who has any idea where a particular stock’s price will go on a given day. Nobody.

Taking a tip is really not much different from playing the lottery. People are always on the lookout for easy money. When we want to believe because it makes us feel good like when we buy a lottery ticket and then imagining what it would be like to hit the lottery. The problem is it’s a myth. Tips rarely win and there is usually an agenda behind the origination of the tip.  Somebody needs to get rid of some garbage stock because they know something you don’t know and it’s not good.  If the tip was really good, the tipster wouldn’t be sharing it.  They be using it themselves to get rich.  That’s why your better off leaving them for the waiter and saving yourself the money.