Forum Archive Index - October 2003

[fntradingsolutions <fntrade@bigpond.net.au>]

Good on you Snoopy an intelligent reply to the Issue at last. But hey lets
not give up now the Debate is just warming up!!!


Woody
----- Original Message -----
From: <tennyson@caverock.net.nz>
To: <sharechat@sharechat.co.nz>
Sent: Monday, October 13, 2003 10:09 AM
Subject: Re: [sharechat] FA/TA


> Hi Shardik,
>
> >
> >Can I suggest that once the very hard yards of T/A are
> > learned and applied that there would be no way that you
> > would want to  mix the two if you aspired
> >to be a successful trader?
> >
>
> I think if the purpose of this debate is to try to come up with an
'overall
> winner' between F/A and T/A, then it is futile.   Now let me explain why
> I think that way.
>
> Let's suppose Macdunk (for example) decides to sell his building
> business.   Will the prospective buyers of this business use F/A or T/A
> to decide what they should offer him?    Clearly because there is no
> 'Macdunk' listed on the New Zealand stock exchange there is only one
> choice: F/A.    Prospective buyers would have to go through his
> business books and decide what it is worth- to them.    The fact that
> T/A doesn't get a look in here, because there is no public market for
> 'macdunk' shares, should be obvious.    But sometimes it is necessary
> to resort to the obvious to highlight the essential differences between
> F/A and T/A.
>
> Proposition number one is that you need a market to make T/A work.
> A market is a snapshot view of 'hot opinion' on a share.     The share
> buyer has come to a view that at the market price they should sell, and
> the buyer has come to the view that they should buy at that same
> market price.   It is the relative weight of opinion on either side that
> determines which way the market price moves.   Put a series of these
> market price snapshots together and you have a moving picture, which
> I will call "the movie T/A".   If you have a view that T/A is of no
> importance at all in a market, then what you are saying is that watching
> this movie that I have called T/A is a complete waste of time.
> However, people do talk to friends colleagues and advisors about
> investment and are influenced by past stories of success.  So, to me,
> the statement that there is no connection at all between past market
> performance and peoples behaviour in terms of buying and selling
> investments does not ring true.    Sure, you can argue that from a pure
> F/A perspective that you *should not* pay any attention to past market
> performance when checking out an investment for yourself.    But to
> argue that because you 'should not' pay any attention to market
> performance so therefore T/A is useless, is to ignore the reality that
'all
> of us' *are* influenced by what others say or think, no matter how
> disinterested and dispassionate we like to think that we are.    When I
> use the phrase 'all of us'  I am using it in the collective sense of 'Mr
> Market'.    In other words even if you believe the market is primarily
> driven by staunch F/A financial drones, this doesn't stop other players
> in the market make Mr Market behave 'irrationally' at times.
>
> If the market always behaved 'rationally' in accordance with information
> released into the public domain then it would never be overpriced or
> underpriced.  Clearly the market does not always behave 'rationally' as
> if it did then people like Warren Buffett wouldn't be able to pick up the
> bargains he does.    Now if F/A analysts do not always drive the market
> directly then what is happening?   Clearly the market must be moving
> because people have opinions outside the 'traditional' F/A domain.
> And it is a time series view of peoples opinions ( be they 'right' or
> 'wrong') that is the essence of T/A.     Faced with a share that is being
> priced 'irrationally' what then is an F/A investor to do?    Effectively
his
> investor tool-kit has become useless.     Put in this position, is it not
> better to pick up the T/A toolbox than to stumble on completely blind?
> IMO to completely ignore T/A is to say that the collective opinions of
> people don't matter.  When faced with the daily reality of a market that
> seems a difficult proposition to uphold.
>
> What the T/A vs F/A debate comes down to IMO, is the question of
> whether hard data on company prospects is all a potential investor
> should look at or the collective opinion of Mr Market is all the investor
> should look at.  If the purpose of this debate is to try and find out
which
> shoebox you should slot yourself into, then I would back up one step
> and ask the question.
>
> "Why are you trying to slot yourself into any shoebox?"
> "What is the point in doing it?"
>
> It is when considering these questions, that I decided that for me there
> is no point in trying to win this F/A vs T/A debate because the ultimate
> goal of 'winning' (sticking yourself in one shoebox or the other) is
> actually rather undesirable.
>
> In coming to this conclusion it is no secret that those who follow my
> postings on this forum will know that I put far more weight on the F/A
> side of things, and those that wonder why might like to ponder the
> following questions.
>
> 1/ Is it more difficult to manipulate 'Mr Market' opinion (as fed to us
> daily on the market) on a company, or the actual underlying
> performance of that company?
>
> 2/ Would you rather base your investment decisions that are based on
> data that is less easy to manipulate or more easy to manipulate?
>
> Furthermore there is always a market for those wanting a fast track to
> wealth.    F/A cannot provide this, so there is always going to be a
> supply of posters, pushing the prospects of some obscure T/A black
> box system that can do the job.  Unfortunately there is always an
> endless supply of people willing to believe these modern day 'snake oil
> salesmen' .    That means if you want to distinguish between 'good' and
> 'bad' T/A comment then there is always going to be an awful lot of
> dross to cut through..
>
> SNOOPY
>
> --
> Message sent by Snoopy
> on Pegasus Mail version 4.02
> ----------------------------------
> "Q: If you call a dog tail a leg, how many legs does a dog have?"
> "A: Four.  Calling a tail a leg doesn't make it a leg."
>
>
>
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