Quote from gms:
Price itself is a great indicator in and of itself. In a sense, it incorporates all FA, sentiment and market conditions, et al, and distills it. It's not used, however, to help ascertain what an equity's share price may be 3 years down the road, as FA may be used. The problem is that things happen during the holding period to change the prospects of such as a longer term hold. Case in point, MSO. In 2002, the company was a brand name leader, no debt, had been consistently growing earnings for a few years, was establishing new markets via new products, media and expansion into Japan, and despite a sluggish economy, was the one publishing outfit asking for and getting higher CPM revenue, which said a lot about the company. The stock did well, until Martha lied to the Feds, as we all know, about her IMCL stock sale -which had not a thing to do fundamentally with MSO except that she's so closely tied to it. So with FA, keeping up with changes is essential. With TA, it's already in the price, so to speak: when the price started waning off it's peak and dipping into s/r, 50/100 moving average and what not, then that provided the update needed. But of course it's essential to consider that the horizon and aims are different for both groups as well and that has a part that plays in all of this too: How can one think in terms of FA when one is entering a trade that will last but a few moments or a few days?
Now, despite likening TA traders to rats and FA investors to higher brainpower, which is a nonsensical analogy and perhaps meant more to rile the readers, it could be noted that rats do very well for themselves, as they seem to prosper, while many analysts have been known to be way, way off the mark, even misleading, at times. Then there's the statistic that roughly 80% of all actively managed funds underperform their index. That's in any year. What's also noteworthy is that it is a minute minority of money managers who *consistenly* outperform their index year after year. It's not the same 20%! It changes every year. For the majority then, their analysis doesn't seem to help them stay on top.
Both TA and FA require brainpower, obviously. The technical trader as well as the fundamental investor both wish to profit and that can't be done without thought, ideas and action. To intimate that one group does and the other doesn't require brainpower is, again, nonsensical. Now as I start to peel the arguments as laid forth, I'm wondering why I ever thought this might be an earnest discussion in the first place, besides the fact that it's Earnest's discussion...
The conclusion that "average returns are for average investors, superior returns are for superior investors", while maybe could be a truth stated in and of itself, really is spurious as a conclusion to the hypothesis given. There is not any connection I know of that proves FA provides superior returns or is the method used by superior traders, nor that TA provides average returns and is only used by average traders, which I believe is what was implied or close to what was implied. Perhaps mrmarket would like to cite the studies that prove conclusively the assertions he made.
