Friday, July 27, 2007

You call that a sell-off? -- MarketWatch

Once in a while you see a statement which is just stunningly strange:

"In general, stocks are not cheap, especially if you consider that corporate profit margins are hitting all-time highs."

If earnings are high, then how is it that stocks are expensive?

Should you care? Should you act if you think stocks are expensive, or cheap? Market timers have no rational basis for expecting to beat out all the other market timers. N-O-N-E. Acting with money without some rational, defensible basis for what you are doing is not rational. Investors, not traders, as a group win. The objective research, as a body of research, bears that out.

Only if you think you have some genuine edge, would you rationally get into trading in general. No disclosed trading strategy has survived rigorous research to see if it works. Perhaps presence of a trading edge explains the existence of brokerage and institutional trading desks. For a brokerage to suggest it is working for you, while it is trading against you, is not my idea of fiduciary behavior. But, as an old friend, the first real portfolio manager I ever knew, once said to me, long ago in the '70s, when I expressed shock at something I had seen, "...but who ever told you that brokers are in business to serve the best interest of their clients?"

You call that a sell-off? - MarketWatch

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