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Strategies & Market Trends : Piffer OT - And Other Assorted Nuts -- Ignore unavailable to you. Want to Upgrade?

To: Jorj X Mckie who wrote (52685)	9/19/2000 3:09:28 AM
From: EL KABONG!!!	Respond to of 63513

Hmmm... I think I may have seen some of these terms used on this thread (once or twice anyway). All in good humor... interactive.wsj.com September 19, 2000 Seven Big Market Myths: Words Worth Ignoring The otherwise simple task of investing money is accompanied by an endless stream of chatter, as money managers and brokers hawk their wares and investment strategists try to make sense of the markets. Mere words? Perhaps, yet unfortunately investors often act on this foolishness. To avoid further damage, here are seven phrases that should be struck from the Wall Street lexicon: "It's a contrary indicator": If the bull market makes it onto the cover of Newsweek or Time, supposedly the party's over. If taxi drivers are buying a stock, it's sure to tank. If the chief executive's biography is published, the company is toast. It is hard to fathom, but in some quarters this sort of anecdotal nonsense actually passes for serious discourse. Combine it with a careful study of astrology and a regular check of your biorhythms, and you would no doubt have a best-selling book that loses investors a truckload of money. "The market's nervous today": Who says? Where's the survey of investor sentiment to justify this statement? Market commentators are always offering broad characterizations of investor behavior for which they have scant evidence. Another favorite: "The stock market was down this morning on profit-taking." How do these folks know it was profit-taking? Maybe we were selling our losers instead. "My all-time pet peeves are the references to 'support levels' and 'resistance levels,' " says Gerald Perritt, editor of Mutual Fund Letter, a Largo, Fla., newsletter. "Somebody will say there's a support level at 3600 on the Nasdaq. What that means is that once the market touches 3600, it will rebound -- unless it breaks though 3600, it which case it will keep falling." "There are more buyers than sellers": This one is popular with the mathematically challenged. But no matter how much the pundits hyperventilate, the amount of shares bought cannot exceed the number sold. "It's a stock picker's market": Other variations include "Right here, you've got to be selective," and "It's not a stock market, but a market of stocks." "Without a doubt, this has the highest triteness factor of any cliche out there," reckons William Bernstein, an investment adviser in North Bend, Ore. "Sure, in any given period, it's certainly true that some stock pickers do very well. Trouble is, they're never the same ones. Being a good picker last year says nothing about whether you'll be a good one next year." The call for careful stock selection is heard most loudly when shares stumble or seem in danger of falling. The notion is that picking stocks is more likely to pay off in a market that's going nowhere. Seem reasonable? It isn't. Even when stock prices fall, stock investors -- as a group -- won't beat the market, because collectively they are the market. In fact, once costs are figured in, investors are destined to lag behind the market, with the degree of underperformance determined by the amount of investment costs incurred. The reality is, the odds are firmly stacked against active investors, no matter what the market's direction. "We use proprietary trading techniques": Translation -- we have an oh-so-secret strategy that you're too dumb to understand. That's probably just as well, because "proprietary" on Wall Street is often an excuse to charge fat fees and lose money in ways you never thought possible. "He's got a great record": Whenever you hear such claims, let the grilling begin. What's the time period used? What does the manager's prior record look like? How does his or her performance stack up against comparable managers and an appropriate benchmark? Is the track record built on just one or two years of outsized returns? Was the manager solely responsible for the performance or did he have help? More questions: Was the record put together when the manager had far less money under management? What happens if you adjust performance for risk, money-management fees, taxes and fund sales commissions? Were the results audited or was the record pieced together using a "select" group of private accounts? You get the idea. "The model's been back-tested": I'm dubious of any strategy that purports to deliver market-beating results. But such claims are especially suspect if they rely on oddball strategies concocted out of tortured historical data. "The investment community looks at the same data over and over again," says Steven Thorley, a finance professor at Brigham Young University's Marriott School and research director at Analytic Investors in Los Angeles. "The problem is, it's difficult to validate results. Unless the aliens arrive and we talk to them about their stock market, we'll never know whether the patterns are repeatable or just a quirky occurrence in our history." Write to Jonathan Clements at jonathan.clements@wsj.com KJC