The Message of the Market(ing)

The big operations can always afford to do market research and initiate slick campaigns.  For those of us who do not have a big research budget, we can observe what they have discovered.  As usual, these are probably contrarian indicators.  Simply put, they are playing to the worst instincts of the weakest investors and traders.

A summary from TV and my email offers:

• CNBC ads continue to suggest that you can do technical analysis at home through advanced trading software.  You can plot retracements that no one else can see, spot trends, backtest your strategies (as if anyone watching had a clue about how to do this correctly!), and use your innate "feel" for sector movement in order to trade ETF's.  At least they no longer have the guy buying stock based upon his daughter's brand of jeans.
• A prominent economist informs me (via mass email) that this looks a lot like 1987.  We have a rookie Fed chair and we have deficits and the dollar is falling.  I should sign up for his service so that I will understand more clearly what he already told me -- we are headed for a complete collapse.  Like every "this reminds me of ..." discussion that I see, the careful historical analysis is lacking.  I admit that the OldProf is not a historian, but I had many good colleagues who were.  I know what good historical work looks like, and this is not the real deal.  I remember well the crash of '87, since I had just left the academic world for a new business.  I watched it and then read countless books and articles.  I analyzed data. It had a lot to do with valuation, the flawed idea of "portfolio insurance," and a few other factors.  There is also a difference with the new Treasury Secretary, Hank Paulson, who is saying all of the right things about the dollar.  Let's give the guy a chance.  We may have another Rubin, who did a great job.
• A warning from a prominent technical analyst, researcher, and newsletter writer who warns me that a recession is coming.  The yield curve indicates an 88% chance of recession!!!  As our readers know, the best research on the yield curve, which we have analyzed carefully, does not support this at all.  The economic consensus on recession in the next twelve months is about 25%, which is not far from the long term average at any time period.  If you are trying to hit the glide path, there is always some chance of missing in the next twelve months.
• Another popular firm wants to sell me their best stock picks, beginning with one that (they imply) is loved by Bill Gates.

Part of the reason that individual investors underperform market averages is that they fall for these marketing ploys.  They are calculated to play upon the worst instincts of the individual investor and the rookie trader.

At 'A Dash' we are eclectic.  We do not have the answers to everything, but we are pretty good at spotting who the real experts are.  We prefer to get our economic forecasts from consensus economic picks, not pundits.  We prefer to get history from historians, not economists or pundits.  We prefer to get market research from those who know who to frame a hypothesis and test it rather than backfit data.

Here is a refreshing idea.  The big firms should hire some real historians, those who look at both the similarities and differences between eras, rather than just trying to sell something.