Point and Figure Charts Disagree With an Interview on Bloomberg Radio

by | Jun 22, 2008 | Asset Management, Point and Figure

OK, no names are used in this post! But holy cow!

In the midst of the sell off this week, Bloomberg Radio interviewed a money manager about the current condition of the market. The money manager went on and on making predictions about the market. How would he know anyway?

Now, everyone is entitled to their opinion, and I’ve been wrong plenty of times. But at the end of the interview, the manager was asked, “what would you recommend an investor look to buy here?”

His recommendations were to buy: General Electric (GE) and Microsoft (MSFT).

Now, this manager probably has some wonderful reasons why he would suggest buying those names now. But when it comes to point and figure, I’m about as far away from those stocks as possible.

Look, we’re approaching mid-year. Both the Dow and the S&P are down around nine percent.

Over time, one of the things I’ve learned is when the markets are rising, relative performance matters. You know…”OK, the yardstick returned 10%, how did you compare to the yardstick…did you beat the yardstick?”

But — when markets are falling, it’s not relative performance that matters…it’s ABSOLUTE performance. For example…”OK, the yardstick lost 10% this year.” What everyone wants to know is “but did we MAKE money?”

People don’t like losing money. And there is little consolation in hearing your broker or adviser tell you, “well, Mr. Jones, the market dropped 20% this year, but we only lost 15%.”

There is ALWAYS the possiblity we can lose money. We want to minimize the truly lousy investments.

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