Yesterday's Worden Report covered a topic that I talked about the other day -- the practice of trying to assign reasons to market moves:
The Worden Report (Wednesday, December 8, 2004)Lambs to the SlaughterI sometimes wonder how financial news reporting can be a bad as it is and be accepted by the public. For example, a very large Internet Publication, specializing in the stock market, in a bold paragraph leading into today's market comments, mentions two key factors in today's market climb. First, the market was paced by Merck. Second, a broker upgrade of GE set a positive tone.
So, I referred to the Merck chart. Of course, I was hit in the face by a stock that has been having a horrendous time of it, having been cut in half in the space of two months. And today, I see a tiny blip, an 80-cent rise. Sure, maybe the stock is due for a rally, but by what stretch of the imagination was it the day's hero? This is like bestowing the game ball on a guy who acquired two broken legs before he suited up. What is the proverbial "little guy" supposed to think when he reads such a statement?
Then I look at GE, which has had a pretty good nine months. I find another blip (40 cents) on decreasing volume. Who is supposed to believe the broker upgrade of this stock kindled the enthusiasm that resulted in today's rally. Give us a break?
We are all victimized daily by an irresponsible press. But in the market, this kind of irresponsibility costs innocent people real money.
Last night Charlie Rose interviewed Lee Raymond, Chairman & CEO of Exxon Mobile - a brilliant and practical man who calls it like he sees it. He said that, in laying strategies for the future, they used to rely on elaborately calculated predictions of the price of oil. Eventually, they faced up to the fact that they were almost always wrong about the price projected. So they said, the real question is not what to do if we know what the price will be. We should be concentrating on what we should be doing when we don't know the price.
