I am retired and take educated guesses on all things financial.

March 19, 2008

March 20, 2008: So This Market Is Going To Do What?

Picture: Bozo gives you his learned advice.

I have seen way too many talking heads and the usual "experts" trying to game this market to the consternation of individual investors. The media explosion of outlets for the expert analysis (guess) has never been so pronounced. My advice - view it as entertainment and expect to receive little but confusion for your time spent watching and listening. I will grant the internet and especially:
accolades for bringing new investment products to our attention, along with interesting opinions that are so labeled.

The study of history is important.

It helps investors to place their security bets in perspective within a diversified portfolio.

Investors studying history know what happened to governments that staked their survival on impregnable castles when - surprise - the cannon was invented. Or what happened to European civilization when the black plague arrived. Or what happened to inland canals (the original American growth industry) when the railroads multiplied. These type of history lessons teach you how surprising surprises can be. They remind you that change is coming - unannounced.

History calls your attention to what is possible, including things you should allow for in your investment plans. And history arms you with concrete examples that refute the ideas that other people accept as gospel.

But, history is not a road map to the future. Nothing in history (or economics) suggests that it is. In fact, history is riddled more with surprise and change than with repetition.

Thus, technical analysts, chartists, wave theory mongers and the like should be generally avoided. There are no truly authoritative theories to prove any of these type of investment practices. If there were, the theory would have to be correct 100%of the time. Thus, these prognosticators, when correct, are lucky, not especially learned. Of course, there are the excuses for failure from these folks. If a bull or bear market continues longer, it is an "extension". It may be called the first "downward" or "upward" move of the ensuing bull or bear market period, although they never tell us in advance to expect an extension,inversion or other irregularity.A stock will receive the usual "but,for" treatment to explain technical or cyclical errors.

An analyst will almost always find a way to explain market action in terms of a theory, no matter how far fetched the explanation might be to someone who examines it closely. Even if the analyst is correct, it would still be after the fact, explaining only the past. The above alchemists never can warn you reliably of something to come.

As with any sect, these individuals have a bagful of logical tricks to explain to us "amateurs" what are contradictions.If you study these explanations closely, you may find some humor in them, as I have.

It is your money. Do your homework. Listen and enjoy media for entertainment. Importantly,do your own homework, keeping a diversified portfolio under your control using the best products available. And speculate only with cash you can afford to live without.

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