TraderPlanet and its writers are about educating investors and traders at all levels. Since this column is the only one set up to take questions, I receive questions ranging from the most basic to the most sophisticated. Of the two, I receive far more basic questions. I suspect this is the case because many folks out there see the market as a path to growing their money and they think that if they trade or invest on their own, they will do a better job of it than anyone else might do, so they want to try. Some of these folks are correct – they can do a better job of making their money grow. Others are not. They are better off with a Certified Financial Planner (CFP), someone who is conservative about investing, thoughtful about the market, and personally attentive to their particular financial situation.
In the above context, please consider the questions and answers below.
- The other day you wrote, “I have little faith in analysts, less faith in economists, and the big boys on the street are often wrong in the direction they choose.” These professionals deal with big money all the time and they invest and trade all the time. They make many billions for their clients. Why do you think you know better and why shouldn’t we listen to them?
Both are fair questions, so I will answer them fairly. First, it is true many of these folks would not be in business or they would not get paid if they could not get it right most of the time. The latter phrase is the one to note. They are not always right and because the financial media culture and folks with lots of money attend them in an almost regal manner, they come across as gurus, wise men and oracles of the highest order. In fact, though, they are just educated people making educated guesses about an entity (the market) that is irrational and inconsistent. Thus to predict with certainty is foolish and arrogant, even if someone is paying you to do it. But don’t take my word for it. Read what one of the top dogs on “the street” has to say about predictions.
- While not predicting an outright crash, Adam Parker, chief market strategist at Morgan Stanley, had through the year been predicting the market to swoon lower from a lackluster 2011. But his projection of 1,167 for the S&P 500 has virtually no chance of happening absent a colossal stock market event. “We felt little joy in 2011 and lots of pain in 2012 related to the target, and find few credible investors really care where we think the market is going to be on a particular day one year in the future … What they more often care about is the logic and thought process, and the empirical evidence that support it.”
Thank you very much guru from Wall Street. You made my point – if you listen just to the prediction, you could be in trouble. The REAL value with these educated professionals is not the prediction; it is their thinking and the evidence they cite. So, I don’t think I know better; I simply decide for myself based on the evidence. And speaking of evidence …
- U.S. consumer confidence rose this month to its highest level in almost five years, helped by a better outlook for hiring over the next six months. The Conference Board said Tuesday that its consumer confidence index rose to 73.7 in November from 73.1 in October. Both are the best readings since February 2008. The index is still below the level of 90 that is consistent with a healthy economy. It last reached that point in December 2007, the first month of the Great Recession. But the index has increased from the all-time low of 25.3 touched in February 2009.
You see, it does not matter to me what conclusions the smart people draw. All I have to do is gather the data and then extrapolate for myself. It is not hard, nor is it particularly time consuming. It is, rewarding, however, as my money is working successfully. Understanding the big picture and then refining that down to growing markets is what I do. As an example, I have been writing lately about the real estate and housing markets. Consider the following.
- More Americans said they plan to buy a home, an appliance or take a vacation, the survey found. About 6.9 percent said they planned to buy a home, the highest on record.
Trade in the day; Invest in your life …
