Forum Archive Index - February 2004

["Woody" <solarmax@optusnet.com.au>]

Snoopy
Phaedrus beat you why arn't you man enough to admit it!


----- Original Message -----
From: <tennyson@caverock.net.nz>
To: <sharechat@sharechat.co.nz>
Sent: Saturday, February 07, 2004 9:10 AM
Subject: [sharechat] Investing, and falling in love.


>
> One of the ways an F/A investor can be ruined is if they fall in love with
> a share.    If we define 'love' here to mean engagement of thought and
> depth of understanding then it is easy to see that the better the F/A
> investor is, the more liable they are to fall into this trap.
>
> F/A investors tend to be optimistic.  After all why would you invest in a
> company unless you have a positive view of it?    Then as you do more
> in depth research on the company, like reading annual reports, you will
> find that management back your view.   The positive reinforcement
> loop has started!     You may even find that the figures in the annual
> report are expressed in such a way as to further reinforce that view.
> For example, at one stage Air New Zealand started quoting results in
> 'EBITDRA'.      They looked good until you realised that the 'R'  in that
> line up of letters meant 'excluding rentals'.    Since Air New Zealand
> leased most of their fleet, and given that they would hardly have a
> business at all without their rental aircraft, this basis of comparing
> results was misleading, even though 'the figures made good reading'.
>
> My own 'love affair' with Air New Zealand has now ended.  I snapped
> myself out of it by going through all my investments and asking myself:
> "Why am I holding this?"      In the Air New Zealand case it was
> because I wanted the income from it and because I wanted exposure
> to one of New Zealnd's biggest industries - tourism.   When the
> dividends ceased, and I realised that I had another investment in the
> tourism industry that was far superior, it was an easy decision to finally
> sell out completely.
>
> The T/A people would chip in here and say that I could have saved
> myself a lot of heartache by simply looking at the charts.   Charts don't
> allow you to 'love' or 'hate' a share.   They are completely neutral
> representations of what Mr Market is telling you.     Thus as an
> 'impassioned' observer you are able to make better decisions.    But
> are the T/A crowd as impassionate as they lead you to believe?
>
> I put the point that the T/A people are equally likely to 'fall in love'
and
> be poorer money makers because of it.    While, T/A people are
> immune from falling in love with individual shares, they are heavily in
> love with their own methods.    I hear the call of traders on this forum
> who exort us to have absolute commitment to your trading plan and
> stick to it.     The idea that a certain trading plan in some situations
> may not work at all does not appear on the T/A person's radar screen.
> The fact that profitable automated computer  trading systems with rigid
> rules have not been designed yet ( I exclude the case of selling black
> box software to a gullible public, which can be profitable) suggests to
> me that if you are too 'passionate' about your trading system it will
> ultimately end in tears.
>
> By contrast, with F/A there are several methodical approaches you can
> take.     Net asset value, growth at a reasonable price, earnings dogs
> of the DOW, dividend yield etc. etc.    The ability to look at a share
> from these different independent methods give F/A investors the ability
> to assess an investment from different perspectives, a breadth of
> perspectives that pure T/A practitioners lack.
>
> In summary my proposition is that 'falling in love' is a problem that both
> F/A and T/A practitioners face.     What I would be interested in
> discussing is how *you*  get out of it.
>
> SNOOPY
>
>
>
>
>
> --
> Message sent by Snoopy
> on Pegasus Mail version 4.02
> ----------------------------------
> "Stay on the upside of the downside,
> Anticipate the anticipation!"
>
>
>
>
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