Investment Myths Busted

Re: Investment Myths Busted

Postby Aspellian » Thu Aug 06, 2009 10:06 am

A short story based on my simple interpretation of various characters, feelings and emotions of the market:
<dunno whether appropriate to post in this thread or even appropriate or not to be posted>

But imagine this scenario:
Currently the analysts are rushing to write their story and valuation target for a particular stock. they want to put a "BUY" call eg. Analyst A wanting to put $1.00 BUY target price (please note that the intention is there, sad to say that often valuation is to support the intention). but prices went up and passed $1.00. To make the "BUY" call meaningful, Analyst A put a buy call of $1.25 by tweaking the valuation assumptions (remember that valuation is an art not a science!! :lol: )
Analyst A changed and released buy call of $1.25 out to market - share price cheong more (remember that throughout all these, market is on an uptrend). Everyone congrats Analyst A (and their firm) for being spot-on - more trades and brokerage commissions for all.

Analyst B picked up the story and knowing that market price already $1.20 - again to make a BUY call more meaningful, their unique target price is set higher, eg. $1.75. market is bullish and optimistic. Report released to market - market gets wild with hope - buyers buy more as they feel that professional analysts using scientific detailed calculations have a price target set (who on earth reads or questions assumptions??). Buyers buy and prices cheong towards $1.75! Everyone congrats Analyst B (and their firm) for being spot-on - more trades and brokerage commissions for all.

Analysts C, D, E, F to Y. . .. comes into the picture to cover the hot stock. "Initiating Coverage", "Upgrade", "Buy", "Outperform" ... Everyone congrats Analysts C,D,E to Y (and their firm) for being spot-on with their price targets - more trades and brokerage commissions for all.

picture this: the Bulls are stroked and tickled and hardened with desire for greater thrusts (and higher prices!), and the Bulls are tickled and stroked more.
More and more investors jump on, more and more analysts upgrade their reports and price targets... the hardened Bulls are stroked more and more, all worries and cares are abandoned, every Bull just wanting to enjoy themselves, they abandoned all cautions, throw away all protections (eg. cut loss, trailing stops, allocations) and try all sorts of positions (eg. derivatives, options, leverages). The Bulls want to have greater Highs.

BUT until the point of cannot tahan-ness and often reports will write - "The Bull Climazed"... The peak of Europhia is reached (I am sure all of you know how it feels . . . :oops: ;) ). But some Bulls are climaz more than once, and the feeling gets higher and higher. But often we will ask - who else will push the market higher...ie. where to find the millions of ammunition to push the feeling Higher??

But an Analyst Z comes along and starts to write on the harm that too many climaxes can do for the Bull and warned that Bull market has reached its Ultimate Climaz, "over-shot", lost its steam, the europhia has over-valued,

slowly but surely the hardness softens, depsite more efforts to stroke the Bull, its to no avail as there's no more ammo... all things back to square one. The Bear takes over (sleep, rest and replendish ammunition in its two production factories)...

Nature is such a wonderful thing and is repeated everywhere, from our daily lives to all things around us (including the market)... many a times, it functions the same way and is repeated over and over again and in many different forms BUT yet the same feeling, same analogy. Thus to be able to control your desires and Bullishness and to know when to rest and when to thrust with the Bull, is an important element to succeed. Do not let the Bull over-rule your head.

PS: I am sure the above story can be elaborated in different analogy as many Bros here are more experienced than me with Bulls and Bears!! ;)

Is the market so simple or am I the simple one?? ;)

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Re: Investment Myths Busted

Postby kennynah » Thu Aug 06, 2009 10:11 am

good writeup man.... you certainly have a future in soft porn writing...wahahaha...joking.. :lol:
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Re: Investment Myths Busted

Postby millionairemind » Thu Aug 06, 2009 10:16 am

Aspellian wrote:
BUT until the point of cannot tahan-ness and often reports will write - "The Bull Climazed"... The peak of Europhia is reached (I am sure all of you know how it feels . . . :oops: ;) ). But some Bulls are climaz more than once, and the feeling gets higher and higher. But often we will ask - who else will push the market higher...ie. where to find the millions of ammunition to push the feeling Higher??
[/b]


Wah, multiple-climaxes... you darn funny lah.. A bro.. :D :mrgreen: :mrgreen:
"If a speculator is correct half of the time, he is hitting a good average. Even being right 3 or 4 times out of 10 should yield a person a fortune if he has the sense to cut his losses quickly on the ventures where he has been wrong" - Bernard Baruch

Disclaimer - The author may at times own some of the stocks mentioned in this forum. All discussions are NOT to be construed as buy/sell recommendations. Readers are advised to do their own research and analysis.
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Re: Investment Myths Busted

Postby Aspellian » Thu Aug 06, 2009 12:05 pm

kennynah wrote:good writeup man.... you certainly have a future in soft porn writing...wahahaha...joking.. :lol:


porn?? :o :shock: what porn?? :oops: :?:
<very very innocent look> :oops: :oops: :?

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DELIGHT, DISCIPLINE, DILIGENT, DETERMINATION, DESIRE

"Its not whether you're right or wrong thats important, but how much money you make when you're right and how much you lose when you're wrong." - Warren Buffet
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Re: Investment Myths Busted

Postby Aspellian » Thu Aug 06, 2009 12:10 pm

millionairemind wrote:
Aspellian wrote:
BUT until the point of cannot tahan-ness and often reports will write - "The Bull Climazed"... The peak of Europhia is reached (I am sure all of you know how it feels . . . :oops: ;) ). But some Bulls are climaz more than once, and the feeling gets higher and higher. But often we will ask - who else will push the market higher...ie. where to find the millions of ammunition to push the feeling Higher??
[/b]


Wah, multiple-climaxes... you darn funny lah.. A bro.. :D :mrgreen: :mrgreen:


just find that market always repeats itself over and over and over again!
many a times its said that human psychology makes up the market, i couldnt agree more! but also i feel that the analogy of market can also be applied to human physiology!
many similar things/emotions/actions are played out the same way in different ways... :D

the more i learn about the market, the more interesting it is!! ;)

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DELIGHT, DISCIPLINE, DILIGENT, DETERMINATION, DESIRE

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Re: Investment Myths Busted

Postby winston » Tue Oct 06, 2009 8:50 am

Long article. I've appended only the essentials ..

Ten Stock Market Myths That Bedevil Investors: John Dorfman

Oct. 5 (Bloomberg) -- In the dinosaur saga “Jurassic Park,” author Michael Crichton wrote about a man who believed a tyrannosaurus couldn’t see him if he held still. The carnivore ate him.

Later in the book, someone asks what killed the man. Another character answers, “He was misinformed.”

Misinformation can be costly. Here are 10 notions that lead investors astray.

Myth No. 1: The best companies make the best stocks.Stocks advance when a company exceeds prevailing expectations. The best companies usually generate lofty hopes among investors, which are hard to exceed.

Myth No. 2: In today’s volatile markets, one must be an active trader.

Myth No. 3: Analysts are a good guide to picking stocks.

Myth No. 4: Beware of October, the killer month for stocks.

The worst month for the markets is September, not October.

Myth No. 5: You can count on the U.S. presidential cycle to predict the market.

Myth No. 6: Price-to-earnings ratios are the perfect measure of a stock’s value.

Myth No. 7: Stocks should be bought when they have momentum.

Many respected market participants hold this belief. Perhaps foremost is William O’Neil, publisher of Investors Business Daily.

I tend to side with Burton Malkiel, a Princeton economics professor who argues that the benefits of using relative strength are canceled out by the increased trading costs involved in using this strategy. Momentum investing works some of the time, but in my judgment it doesn’t work consistently.

Myth No. 8: War is good for the stock market.

Myth No. 9: The market prefers Republicans.

Myth No. 10: Market timing can greatly enhance your returns.

It could, if one could do it accurately. However, successful market timers are rarer than scrawny sumo wrestlers. Most people who try to time the market end up being on the sidelines during the unexpected sudden upturns that account for a significant part of the market’s long-term gains -- this spring’s rally, for example.

http://www.bloomberg.com/apps/news?pid= ... nwr7gY50dQ
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Re: Investment Myths Busted

Postby winston » Fri Oct 09, 2009 7:48 pm

On timing the market:- By Keith Fitz-Gerald, Money Morning

.... And don’t bother trying to “time” the market. That’s a recipe for disaster, as reflected by numerous Dalbar studies.

The Dalbar data repeatedly demonstrates that investors who try to time the markets not only fail miserably in the near term, over a period of years they tend to fall dramatically behind the market averages.

How much behind? Try 40%-60%, depending on what data period is examined.

http://www.dalbar.com/

http://www.moneymorning.com/2009/10/09/ ... rs-market/
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Re: Investment Myths Busted

Postby winston » Mon Oct 19, 2009 11:15 pm

Five Modern Myths By MICHAEL SANTOLI

FOR SOME OF US, it's always a Mark Twain moment. The current juncture in the markets seems a particularly appropriate time to invoke the American Aristotle's observation that, "It ain't what you don't know that gets you into trouble. It's what you know for sure that just ain't so."

Here's a selection of items that most investors and market observers seem to "know for sure" -- and that just may not be so.

http://online.barrons.com/article/SB125 ... 91061.html
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Re: Investment Myths Busted

Postby kennynah » Mon Oct 19, 2009 11:20 pm

"It ain't what you don't know that gets you into trouble. It's what you know for sure that just ain't so."

can't say i agree with the above...
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Re: Investment Myths Busted

Postby winston » Wed Dec 09, 2009 7:12 pm

Exposing fallacies in investment

That's the mission of Boston University professor Zvi Bodie, who is enraged at financial advisers' 'misinformation', reports GENEVIEVE CUA

Prof Bodie cited three common investment fallacies.

One is that saving is for the short run and investing for the long run. But according to financial economics, saving means income minus consumption. Investment means selecting a portfolio of assets.

A second fallacy is that the only way to reduce risk is to diversify. In finance, however, the way to reduce risk is to hedge, insure or hold safe assets.

The third fallacy is that stocks become safe in the long run due to 'time diversification'. But if this were true, stocks would not carry a risk premium, says Prof Bodie.

http://www.businesstimes.com.sg/sub/vie ... 83,00.html?
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