Putting your money where your mouth is

It seems that the cricketers are hell bent on helping me. Today it has come in the papers that Harbhjajan singh has been reported by the umpires and the third refree for faulty action. Only last month he was cleared by the ICC where cameras from all angles examined his action.

Where is the unpire, the third refree or the ICC here? If his action was examined by so many angles why not the analysts on whose recommendations many people put their money on the line.

Former Pakistani captain Imran khan said that the Pakistani team lost because of lack of consistency. That’s exactly what I am saying- even if he is good, how do you ensure that he is consistent. It reminds me of a post I made by extracts from a book by Alexander Elder where all the superstar gurus fell by the wayside because of changing market conditions. If they could be proved wrong, what about the run of the mill analyst?:-

Beware of Trading Gurus-http://www.traderji.com/showthread.p...t=Beware+gurus

In some cases the individual investor maybe at fault but to make it a sweeping generalization would be misleading. Even in fly by night operators, IPOs, Ketan Parikh/Harshad Mehta, the culprits are brought to book though the small investor cannot shift blame. ONGC took its own sweet time to refund our money. You can always blame me but was I going to dream that a company like ONGC would do a thing like this. Where is the “indicator” to judge. "Holy grail" can be used to camouflage temporary inefficiency too-

There is certainly no holy grail
What if there is an unholy trail
All stocks will fail
Not just SAIL and GAIL
Such people should be stopped;whether they recommend by TV or newsletter/email
Not many would shed tears if some land in Jail
Most investors would proabably hail
Whether they are high net worth individuals or retail
By such measures, on the head, they would have hit the nail
If only the law would not move with the pace of a snail
All this would be avoided if the anaylsts provided full detail( about themselves and their recommendations)
As it is, with a plethora of indicators, TA at times can be a confusing cocktail.


If you think I am exaggerating, some angry trader called an analyst a pimp.The peson whose has been cheated will always react like that which somebody did tearfully at the investor camp.Efficient Analysts would not be affected. The issues is that since they rarely give reasoning, how can you judge even otherwise?

Nevertheless, Arun’s point is interesting. There will always be the odd guy who might outsmart the professional managers and even the entire system the way Harshad Mehta did. I remember managers saying that Mehta could see a whole picture where they could only see a tree. My own father makes much better and faster decisions watching NDTV that I do using charts and indicators. It’s a double loss for me as I miss out on the ladies too.

I have also seen characters at my brokers who just freak out sitting in front of the terminal:-

They are able to make decisions on Open, high low and close
In things like technical analysis, they never poke their nose
Complexity is alien to them, such problems to them the markets do not pose
They are as different from technicals as from Gandhiji was Netaji Subash Chandra Bose

Though both used different methods, I thought Bose too was extraordinary and he had credibility too. Many analysts may not have that.

Nice of you to pitch in, Jaideep. You should pay some attention to Dravid doo:-

Yesterday(24/03/2005), it came in the papers that former cricketer Geoffrey boycott has called Rahul Dravid “The Banker” since he is bankable. Some analysts maybe bankable in a different sense- they can empty your bank account. Boycott advised Ganguly to dance on his feet to improve footwork. Since the market is dancing all the time, wonder what the inefficient analyst should do.
Two days ago I recd an email from a well known analyst asking for Rs1000 a day for day trading tips. He said I would have to pay monthly advances and for next year he was going to demand six months advance fees. When I wrote back that nobody in the market can be right all the time and if there was a loss, would he refund the money, there was no reply. On the positive side a newsletter www.equitystrategist.com confirmed that they do profit sharing on a 15% basis(you have to give a power of attorney and inform your broker to let them transact on your behalf) and charge nothing for losses which automatically build up their credibility.
In a book, “Random walk guide to investing”, this is explained by its author, an investment mangager which need not be true for everybody:-

“Professional market strategists and analysts make predictions and recommend trades generate revenues for their employers-not because they really have any expert knowledge that no one else posseses.

The way to get rich from investment advice is to sell it not to take it.

It maybe apparent to intelligent investors that if anyone possessed the ability [to forecast stock prices] consistently and accurately, he would become a billionaire so quickly that he would not find it necessary to sell his stock market guesses to the general public.

Who wants to admit that an amorphous inorganic entity such as the mkt is smarter than they are. Certainly not the financial professionals who earn lucrative fees and commissions for telling naïve customers that they know best. Unexciting truth is that the financial market-that sprawling, clumsy behemoth is smarter than any individual. Neither you nor any guru can beat it consistently over time? They will not accept a theory that claims that all their investment advice, earnings, projections and esoteric charts are worthless.

There is no evidence that even the research of the institutional investor all-stars add value.”

If investment advice is so dicey(comments on underperforming mututal funds worth reading-http://www.traderji.com/showthread.php?t=1887), one wonders where trading stands?

Yesterday, I went shopping with my family when we saw a funny message "50% discount for batting coaching classes. Saurav, please join". Many ex cricekters have said that he cannot go on because of captaincy alone. If he has to face so much monitoring and critcisim, why not the analyst.?

One cricketer said in the morning" It is very rare that all batsmen click at the same time. Someone is bound to fail and others make up"

In the stockmarket, the situation is far worse because one never knows how the stocks will fare but no monitoring system. Is something like bowling or batting averages was there, one could know whom to ignore and whom to follow.

I remember traderji himself replied to one of my posts almost a year back that day trading is best avoided . Now I understand why he said that. At least these Rs 1000 per day characters should be checked if nothing else.

Today Virendra schewagg also said," You are as good as your last innings". If only there was a way to monitor the analysts performance.

When I was discussing all this with my father yesterday, he reminded me of an incident that happened more than 5 years back. One of the leading banks was offering loans to play in the stock market against shares as collateral. My father(CA and successful investor) told them that shares was a hobby with him and a kind of part time activity. However the people at the bank were full time professionals with all the financial muscle(funds). Why should they lend money if they could do it themselves and earn a higher rate of return than the interest? They had no answer but sheepish grins. Eventually, we didn't go for the loan because the interest rate was too high.

Recently, we came to know of another prestigious bank which instead of earning a handsome rate of return over a period of six months ended up a loss for a managing director of a reputed company. One has to be vary of portfolio managers also who manage your funds as against analysts where you are the decision maker. I had written earlier that in profit sharing arrangements accountability is assured but one cannot take even that for granted.

I don't like to keep adding positions unless something really interesting comes up.

Last evening, I saw at least three programs where Saurav ganguly was castigated left, right and centre for his form.

Today(3/4/2004)in the sunday times, it has come that both in averages and in cases where India has scored major victories, VVS Laxman has the highest averages in one day internationals since January,2004. This is among all the top 7 Indian batsman and the irony is that he is out of the team.

The stockmarket is not cricket but at least there should be some monitoring mechanism; otherwise how can one spot ironies like the above. Some people really put their money on the line on the basis of what they say. How do you know which analyst is in form and who is not?