| money page |
paul
| watching the business news |
C
PFE
EWK
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| I watch a business show--the Nightly Business Report—and what I gain from the viewing of this show is: to re- inforce the notion that Jesus is the greatest investor of all time because he is the only one who knows what is going to happen tomorrow. Nevertheless I watch the show. I enjoy the show. Paul Kangas is the host, also founder of the program—now entering its 28th year and in no way does Paul differ from the rest of us— beginning to show our age. The copy is read from a teleprompter and for every 9 words that leave his mouth 4 are mangled to a pulp. As I say—one of the many disturbing effects of the aging process—the eroding diction affliction. His mispronouncing of the names of companies is legend and from time to time to get backwards the price movement of a stock—down instead of up or vice versa. Its a private joke between me and myself as I lay there on the couch to await the mangling of the copy—not long in coming- and I start laughing. I become hysterical. But we must give credit where it is due. He is Paul—the founder of the show. Once or twice a week a feature called Market Monitor is presented and a few minutes of back and forth between Paul and a guest—some market hotshot type—occurs and it all boils down to 2 questions: 1) What is the market going to do; and 2) what is the hotshot going to do? Ive watched the show for years through every conceivable type market, up, down and sideways and even in the worst of times when a chart of the DOW looks like it is falling off a cliff—not once have I heard a Market Monitor guest say: I am selling stock. It doesnt happen. Last night the guest was Michael O’Higgins of O’Higgins Asset Management. Hes been on the scene 40 years or more and wrote a book— Beating the Dow—that briefly landed on the bestsellers list. I read it myself. The book describes a system of investing that became known as the “Dogs of the Dow” I wont describe the system. Its quite simple, designed as it is for such as myself—the AIC—the Average Investing Chump--and enjoyed something of a vogue for a few years with the usual varying degrees of success—good, excellent, poor. Back to Paul and the show. Round and round he goes with O’Higgins and now the moment of truth arrives—for Paul to review the stocks touted by O’ Higgins on his last visit to the show-- six months previous--and how they have performed in the interim. Cut to O’Higgins wearing an expression that might be called the stiff upper lip and he says: do we have to? Yes we have to and now charts appear—of 5 stocks—and the word carnage somehow fails to describe. Carnage is for openers. Its a blood bath. Here they are: Citigroup (C): minus 25% Pfizer (PFE): minus 18% Belgium Ishares (EWK): minus 57% Thai Fund (TTF): minus 48% Precious Metals Profund (PMPIX): minus 74% I grantyou we are in a bear market but even so. I'm on the couch laughing like at the beginning with Paul mangling copy. But we arent finished. Now Paul says toO’Higgins: "How about some new recommendations?" It all recalls another book—A Random Walk Down Wall Street by Burton Malkiel. Malkiel proposes a thesis—the Efficient Market Thesis. The idea is that you look up a stock in the listings and the price you see reflects everything that is known about the stock at that exact moment. All the information about the company has been digested by the market and factored into the price of the stock. This is another way of saying: there is no such thing as a good or bad stock. Today is today and tomorrow tomorrow and in no way does the one relate to the other stock- wise. To prove his point Malkiel proposed an experiment—for a chimp to throw darts at a page of stock listings and then six months or a year later to check the results against the performance of some of the hot shot portfolio managers regularly interviewed on shows like Nightly Business Report. Later some students at Princeton got hold of a chimp and taught him to throw the darts and the results could be interpreted in one of 3 ways—yes, no or maybe. Why do I bother to mention all this and where does it leave us? It leaves us back at the beginning, a situation in which all investors—from the warren buffet/peter lynch/george soros types down to such as myself—the Average Investing Chump—share one thing in common: to purchase shares of a stock and then immediately drop to our knees, praying to Jesus. |