| Saturday, 16 January 2010 13:47 |
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The Biggest Taboo in the Stock Market Stock market is a noisy place. I mean, a lot of people like to talk about the stock market. You have stock analysts, colleagues, friends, cleaners, some random guy who gets some quick money recently because of speculating in stocks and many more. They all love to give one thing and that is the latest “stock tips” of the day. Stock tips are probably the most dangerous booby traps. It gets really bad especially when you see some stupid idiot earnings real quick cash based on some tips that he proclaims to know from his broker and you begin to think that, “If that idiot over there and earn money from the stock market, so can I.” This is not where you should be heading too. In fact, when I see a photo of a China farmer touching the stock market bull statue outside his brokerage firm, I begin to believe what is shown on the TV about people burning their fingers in the stock market. I really find it interesting from psychological point of view that people simply love to give stock tips. I learn these in places like soccer betting, horse racing especially (I’m a big fan of horse racing industry). Maybe everyone just wants to show that they are smarter than any other investors out there without even analyzing anything. Every other time, I will always hear some people discussing about stocks in front of me and share their so called hottest tips in town and their road to millions in their imaginary portfolio. This is probably why I usually choose to keep quiet in such situations. On a couple of occasions when I was young, I did listen to some people and follow what they told me to buy. A series of unfortunate events followed and I was left stranded. The story usually ends with the stock tips guy keeping quiet about the tips that he mentioned or when the stock really picks up finally after I have covered my losses, the stock tips guy will come to me and say, “Hey, I told you the stock will go up, see I’m right!” Oh man. Ironically they are my friends so I don’t really want to spoil any relationships and there is always money to be made. From then on, I swear to myself not to listen to anyone anymore. If I were to lose any money in the stock market, it was due to my own poor judgment. Stock tips come in many forms. However, there is one particular source of stock tips that I really dislike a lot (other than from friends). I have offended financial advisors with my dollar cost averaging post so I guess it doesn’t hurt more to offend another profession. I really find it funny that people believe in analyst reports. In fact, I was recommended by some investment books to start learning things from analyst report. Maybe it is trying to tell me to understand what is wrong. I will not state the typical reasons that most people have against analysts but I will probably use some observations that I have made so far in my short life span. 1. Analysts are analysts for a reason. 2. There seems to be a difference between internal confidential analysts’ reports and typical open to public brokerage analysts’ reports. 3. The ratio of buy to sell calls analysts’ report has always been a landslide victory for the buy calls regardless of the stock market performance. 4. I find this one particularly interesting and I must emphasize that I make no stand about it at all. Somehow, I don’t see successful great investors having the accolade CFA behind their name. 5. This is on personal count. During 2008 financial crisis, I click on several local brokerages and I don’t recall seeing any “sell” calls reports. One of them predicts that STI will hit 4200. I doubt I have anything more to say so I guess I shall end this off with a joke. Einstein dies and goes to heaven. When he gets there, St. Peter meets him at the pearly gates and tells him that he’s sorry, but because heaven operates on a centrally planned economy, there’s a housing shortage, and Einstein will have to share a cloud with three cloud-mates for a while. Einstein is agreeable and is introduced to his new roomies. The first fellow says, “Professor Einstein, I’m honored to meet you! I have an IQ of 130 and would love to talk with you.” Einstein replies: “That’s great. Let me settle in and we’ll have a talk about astrophysics.” The second fellow says, “Professor Einstein, I only have an IQ of 100, but I’m honored to meet you, too, and would love to get to know you better.” Einstein answers: “That’s fine. Let’s chat over a game of chess later on.” The third fellow says, “Professor Einstein, I’m not as smart as those other guys, but I’d like to speak with you as well.” And Einstein says, “So where do you think interest rates are going?” Source: Doug Casey, Conversations with Casey, June 24, 2009. |
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