Good Morning Ray. No matter what I've attempted in the past, October manages to take a big bit out of my wallet. I've been hibernating to preserve capital.
Interesting comments on technical analyses from Up and Down Wall Street columm in Barron's:
<OUR PROPHETIC OLD PAL, as intimated, likes to dabble in the black art of technical analysis. As it happens, these are not the best of days for many a practitioner of that specialized investment approach. Once upon a time, and not all that long ago, technical analysis was much in vogue, both among the big brokerage houses when they were in their expansive stage and large institutional investors whose habitats resounded with chatter about heads and shoulders and plunging necklines, stuff you'd reasonably expect to hear in salons devoted to peddling haute couture rather than on trading floors.
To the uninitiated and some of its votaries as well, technical analysis has always had something of the occult about it. But the seeming mumbo-jumbo, in fact, lends itself to quite rational exegesis (admittedly, a lot of market technicians are better at drawing charts than translating their lingo into understandable sentences). We don't feign to be an enthusiast, but we've found, even on the most rudimentary level, charts are great road maps to where the market is and how it got there and offer some intriguing hints as to where it might go.
As to individual stocks, charts of their action over five years or so (the kind that often accompanies stories in this very magazine) provide a neat snapshot of whether you're looking at something that has been rising with the speed of light or might just be preparing to do so, rather a crucial difference. We're a bred-in-the-bone fundamentalist, addicted to P/Es, cash flow, book value, tangible prospects and the rest of Ben Graham's kit and caboodle, but we think technical analysis is another arrow in the investment quiver, so why not use it?
As we said, its popularity in Wall Street has been ebbing relentlessly. Technical analysis has never been a big profit generator, the way, for example, investment banking has, so it's a natural target for cost cutting, and firms have been whacking away at the shrinking cadre of technical analysts on their premises. Earlier this year, Smith Barney took the ax to Louise Yamada, who had labored for it some 24 years and gained considerable and well-deserved recognition in the Street. While it was at it, Smith Barney decided to dismantle the entire tech department.
And just last week, Ralph Acampora was given the sack by Prudential, which, a la Smith Barney, also decided to go whole hog and give the old heave-ho to what was left of its technical-analysis unit. Ralph was no slouch at getting publicity and so was especially widely known even among the investment masses, which usually provides a decent measure of job security. What shocked us even more, though, was that he was invariably bullish, and we long had taken it as an article of faith the only reason market analysts got fired in Wall Street was they had suffered some sort of an aberrational episode and turned bearish. Apparently, not; the realization has left us deeply shaken.
Something of a puzzle is the paradox of technical analysis steadily losing its appeal to Wall Street, even while entrusting investing decisions to black boxes, the epitome of investment voodoo (think Long-Term Capital Management), has gained enormously in attraction. After some pondering, we decided both trends were rooted in the loss of allure of what's known as market timing: buying and selling stocks when a significant change in market direction seems in the offing. And technical analysis is especially good at spotting intimations of such changes.
In turn, the fall from favor of market timing, we suspect, has a lot to do with a surprising imperviousness to risk still so rife among investors who, in large numbers, remain wedded to the notion that stocks always go up, and when they don't, it's merely a temporary interruption of a preordained trend, and a great buying opportunity. That kind of attitude, alas, just begs for disenchantment.> |
