Question for you, who is sane?

A friend of mine who thinks himself an investor asked me about recent market news. He is apparently confused and made angry. Two examples he gave to me are 1. TXN missed earnings a couple of weeks ago but came out to upbid earning estimate yesterday; 2. HPQ beated earnings and gave good outlook a week ago but came out this afternoon to cut sales outlook. He made it simple by asking the question, "are they sane or am I sane or there is something else?"

Since I don't think myself qualify as an experienced investor, I told my friend that I don't know but I will ask my friends here at elitetrader forums. Here must be some very successful investors/traders can answer his questions and help him out of his confusion.

Thanks.

 

Most fundamental analysis is a waste of time.

Nothing in the stock market is logical. Things are not supposed to make sense. The silliest thing is when a news reporter tries to rationalize why the market is up or down... in reality there is no logical reason or story. Simple supply and demand is the real answer.

In my opinion any word out of company management.. whether CEO or CFO should be ignored. Also.. analysts especially should be ignored. The only thing that has any value is a chart.. it never lies to you.

By the way.. the examples you mentioned could very well be 2 isolated incidences... where companies reversed guidance. Nothing more.. nothing less. I wouldn't make much of it. Trying to read it as some type of conspiracy is naive in my opinion.

Your examples in your post... just play into my psyche of ignoring the talking heads (CNBC, Bloomberg), news, upper management, fundamental data.. and just concentrating on the supply and demand painted by the charts.


--MIKE

 

Before you ask who is sane, what the hell's sane?

 

Being sane are those moments when we learn to control the insanity that is constantly trying to unleash itself from our minds. By our very nature, we are designed to be insane -- we just spend a lot of time resisting it.

 

Was that this morning's "Thought For The Day" at the asylum ?

 

sane is common sense in the human society. As operators of companies, they ought to be sane in my opinion. But apparently this year is very different. What do you think?

 

sanity.

 

superior to being 'insane'?

See all this indicator (stochastics, MACD, CCI) masturbation. The people who do it believe it to be sane, I guess. They don't realize how distorted this can be compared to a simple price action. Incidentally, Fibonacci retracements I like so much are about that, the price action. It's not that I advise against using stochastics, it's only that you really need to know what you do, how to use it, when to and when not to use it. The herd mentality is another example (and the widespread use of common indicators is an example of herd mentality, BTW). It is sane, meaning safe. But being contrarian (read: 'insane', to the sheep) pays off better.

 

What you said is contradictory, it seems that if you are a contrarian (e.g. I am), you'd want to use those indicators to see what the herding people (whose use of them is so widespread) are seeing to make their decisions. BTW, I don't use them, I use smth else that shows where the uninformed crowd is going.

 

Dude, with all due respect, that is utter BS. A lot of things in the markets ARE logical and DO make sense. The problem is they make sense post factum, usually and are hard to see as such contemporaneously. The "simplest supply and demand" IS a function of the incoming information, whether public or private, given in the news or seen in order flow. I don't see how that in any way takes away from the value of the fundamental analysis. The new info comes out that affects the FUNDAMENTAL value of the company, that, in its turn, often causes people to revise their expectations and to trade on the basis of such revisions.
If you wanna ignore the news that comes out from the company or from other sources and look at the chart exclusively, it will be like a doctor examining a patient with an axe sticking out of his chest where the doctor says: "Hmmm, let me see what's going on here... I'll analyze his vital signs, check his blood pressure etc and maybe I'll know what bothers him..."
It may well be that what the CEO says happens to be less accurate or true than we'd like it to be and it may be reversed by that same CEO very soon. That's not the point. As long as that gives an indication of the information set that most people have at any moment, it is CRUCIAL. But you keep ignoring it I'm glad there are some who do.