Quote of the Day


“An investment operation is one which, upon thorough analysis promises safety of principal and an adequate return. Operations not meeting these requirements are speculative.”

Benjamin Graham


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  1. V L commented on Mar 22

    It is easy to ignore the reality and to be a bull. As a bull, you do not even have to think, just run with the crowd and yell Booyah.

    In addition, the bulls have many powerful market manipulators on their side: The Fed, US Treasury, Japan MoF, Wall Street investment banks, CNBC talking heads etc.

    On the contrarily, the bears can only rely on the reality (nobody will manipulate the markets for them).

  2. Michael C. commented on Mar 22

    In other words, everything (except my checking & savings account, CDs, & treasuries) is speculative?

    What else “promises safety of principal and an adequate return”?

  3. Michael C. commented on Mar 22

    V L said “It is easy to ignore the reality and to be a bull. As a bull, you do not even have to think, just run with the crowd and yell Booyah.

    In addition, the bulls have many powerful market manipulators on their side: The Fed, US Treasury, Japan MoF, Wall Street investment banks, CNBC talking heads etc.

    On the contrarily, the bears can only rely on the reality (nobody will manipulate the markets for them).”

    Why is it always necessary to categorize and claim the other side are the manipulators.

    I would argue that if you are a bull, you are simply riding the long term trend of the stock market.

    And there are plenty of both bulls AND bears that “manipulate” the market.

  4. V L commented on Mar 22

    “Why is it always necessary to categorize and claim the other side are the manipulators.”

    Please tell me when “The Fed, US Treasury, Japan MoF, Wall Street investment banks, CNBC talking heads, etc.” manipulated the markets for the bears? When?

    “…you are simply riding the long term trend of the stock market…”
    It is the same what I said: “As a bull, you do not even have to think, just run with the crowd and yell Booyah.”

  5. Rob commented on Mar 22

    We’re all speculators. Does the thorough analysis include CEO contracts? How many put their own interests ahead of the shareholders’? How many hidden time bombs are waiting to go off in the months and years to come? Greed is NOT good, especially when it causes a company to be run for the short term benefit of a chosen few.

    Barry, I’m beginning to understand why you consider Greenspan’s tenure to be less than successful. I guess the academics will figure it out, but I wonder to what degree going private is a consequence of easy money. May WE not reap what they sow. Good luck to us all.

  6. V L commented on Mar 22

    Michael C.,

    The Fed, US Treasury, Japan MoF manipulate the markets through the use of jawboning, re-jigging of inflation and economic statistics, and outright currency interventions.

  7. Michael C. commented on Mar 22

    V L,

    What I am saying is that it sounds like you are giving the good vs evil, bear vs bull, rhetoric. I just don’t understand the point. As if in being a bear there is some greater good to be had because you are not “running with the crowd” or because you are being “realistic.”

    We are in this to make money, no? Let me ask you – when you are long in the market, you are looking for the market to go up regardless of the reason, aren’t you? I know I am. Vice versa, as well.

  8. Josh commented on Mar 22

    Michael C. you should read some Graham/Dodd, Buffett, and Pabrai. There you will find how to find opportunities which provide a “margin of safety” that should in all likelihood offer an adequate return.

    Buy on value. And not the value of the typical value mutual fund of 2.5+ book value.

    Worst case is after 2 years you lose only the inflation of your principal. Best case you are 50%-100% in the black. And no, forward PE is not an item that was even used in Graham’s day.

  9. V L commented on Mar 22

    Michael C.,

    You did not answer my question:

    “Please tell me when ‘The Fed, US Treasury, Japan MoF, Wall Street investment banks, CNBC talking heads, etc.’ manipulated the markets for the bears? When?”

    I said that the game is not fair; it is often rigged for the bulls:

    “In addition, the bulls have many powerful market manipulators on their side: The Fed, US Treasury, Japan MoF, Wall Street investment banks, CNBC talking heads etc.”
    However, you are saying: “…there are plenty of both bulls AND bears that “manipulate” the market…”

    Please tell me how your statement is true. How? Who is more powerful than The Fed or US Treasury that could manipulate the markets for the bears to counter President’s Working Group of Financial Markets manipulations that ALWAYS favoring the bulls?

    As far as making money, you can make money on both sides. (The only difference, you have to be much smarter in order to make money as a bear.)

    P.S. Bush should rename the “President’s Working Group of Financial Markets” to the “President’s Working Group for Manipulating Financial Markets” to reflect their true functions.

  10. Michael C. commented on Mar 22

    V L said “Michael C.,

    You did not answer my question:

    “Please tell me when ‘The Fed, US Treasury, Japan MoF, Wall Street investment banks, CNBC talking heads, etc.’ manipulated the markets for the bears? When?”

    V L,

    I will answer your question to your pleasure then. They never have. (Though I don’t even know if my answer is true.)

    Like I said, I don’t know what the point is…and we’ve kind of strayed off topic! Calling manipulators to me is akin to calling out conspirators or whatever. In the end, what have you got?

    And you said in your initial post that bears rely on “reality.” Then you say that the market is being manipulated isn’t it?! And the market is rigged to go up?! If what you say is true, isn’t that the reality?! Then why be a masochistic bear?!!

    (Just sayin’ because I find myself more bearish than bullish usually as well!)

  11. Barry Ritholtz commented on Mar 22

    Let me rephrase what VL said somewhat differently:

    The long term trend of population growth is upwards; The natural tendency of mankind is to create and innovate. Over the long term, this leads to new products, companies, and stocks, and is historically positive.

    However, this often gets carried to an absurd extreme.

    As I have noted previously, the overwhelming bias of the many parties involved in the markets is strictly to the upside regardless of risk. Wall Street and Mutual funds wnat people to stay fully invested (it drives fees); Investment Banks want a good environment for deals; The Government (regardless of party) wants to show low inflation and hi growth; The Fed wants to avoid too much disruption, looking for low volatility; The Media repeats all of it.

    What I try to do — and what many posters here seem to agree with — os to push back on the dominant meme, to look beyond the headlines and fees, to get at an aspect of reality that is under reported.

  12. howard commented on Mar 22

    let me in particular suggest that no one should be in the market without having at least read ben graham’s intelligent investor, which is relatively short and non-technical.

    and yes, what most people do today is speculating, not investing. there is nothing wrong with speculating qua speculating, but we should at least label it what it is.

    PS. at the time that graham wrote, there were plenty of stocks that were “net nets” and therefore crying “buys” as “investments.” Thanks to computerized screening and other phenomena, there are hardly any (if any) “net nets” left, which is why even buffett, graham’s great student, no longer limits himself to pure ben graham in his investments (the rough buffet-ism is “i’d rather buy a great company at a good price than a lousy company at a great price”). still, the essential distinction remains: if you’re purchasing stocks because that market area is “hot” or because you believe in the greater fool theory or any of a number of other rationales, you’re engaged in speculation, not investment.

  13. D. commented on Mar 22

    What about Mother Nature? You’re forgeting Mother Nature!

    For the last couple of hundred of years, growth has been based on cheap oil.

    Millions of years of stored energy has permitted us to generate a couple hundred years worth of growth. Unless we find a way to cut our energy use or find a new source to feed our growth. And it’s not easy to replace energy when in one year we use up more than what Mother Nature produces in millions of years!

    A few hundred years ago we deforested Europe. Not long ago, we were doing it in North America. Now to feed our growth system we are deforesting the emerging countries.

    Just looking at our dependency on both energy and our forests, can we truly expect growth to continue unless we replace our materialism for less tangible consumption?

    I have my doubt s especially if Asia develops as fast as we are predicting. Sure we can be garanteed growth for a couple of decades maybe, until we end up like Easter Island.

  14. matt m. commented on Mar 22

    I firmly believe that a trader will underperform until they escape the bull/bear…good/evil type of nonsense we often hear. It traps you mentally into a blame mentality that has no place in a top traders mind. Top traders blame themselves for misinterpreting a position not the markets or some 3rd party ie. fed…momo investors..hedge funds…ceo’s…on and on.

  15. Bob A commented on Mar 22

    “to look beyond the headlines and fees, to get at an aspect of reality that is under reported…”

    …and to attempt to avoid getting massively hosed. As in 1987 and 2000-2003

  16. Joe S commented on Mar 22

    Its great to see a trader quoting Benjamin Graham. Thats why I love reading this blog.

  17. V L commented on Mar 22

    Thanks Barry!

    You hit the nail on the head!

  18. Michael C. commented on Mar 22

    BR said What I try to do — and what many posters here seem to agree with — os to push back on the dominant meme, to look beyond the headlines and fees, to get at an aspect of reality that is under reported.

    I understand and appreciate that. As always, thanks, Barry!

  19. rebound commented on Mar 22

    “I firmly believe that a trader will under perform until they escape the bull/bear…good/evil type of nonsense…”

    Yes! Please stop identifying with the cult of bear. Try to earn a nickel either way. I don’t subscribe to his service but would venture to guess that Barry recommends both long and short positions. Your own performance or lack of performance is your own damned fault.

    I had a trade absolutely crater during this most recent market pop because my Ameritrade “trade trigger” puked. When I checked the trade status after the market closed I was shocked. This is the first time I have ever used automation to trigger a market order outside of a stop market order, and the result was less than optimal. A bone headed system error IMHO, but the trade is still MY responsibility.

    Error Message:

    “Trigger condition:
    Symbol: …
    Condition: Bid
    Operator: Less than or equal to
    Operator value: $50.00

    The associated STOP MARKET order has NOT been placed due to the following error:

    The stop price must be below the current bid for sell stop orders.”

    In this particular case the trigger price and the order market price were equal. Next time I will put in some buffer.

    It would have been nice for the system to warn me this was invalid when I set up this trigger stop loss mechanism days before, but live and learn. Back to Plain Jane stop market orders for now …

  20. Winston Munn commented on Mar 22

    From my perspective, what BR does with this blog is simply an attempt to wipe off the positve bias that clouds the mirror so we can all see more clearly the reality of the reflection.

    Claiming bullishness or bearishness is in the realm of cheerleading, not investing. This site is neither Bearish nor Bullish, but based on the sense that realism is what ultimately changes the course of the markets.

  21. Gunther commented on Mar 22

    to the bull / bear debate:
    Is it really possible to manipulate the market in the long run? If yes, for how long?
    A technical reaction might be influenced by talk and index futures buying; but what is needed when everybody realizes that something is wrong and trys to sell the own position? In such a case it would take a huge amount of money to keep the market up. That money might drive unintended markets like copper, gold or whatever up too.

  22. greg0658 commented on Mar 23

    Not sure the big one would value copper & gold. More like food, water and shelter.

    What can bring on the big one? Bad weather. Energy pricing/shortage. Entity on entity fighting. Medical emergency. Food shortage. Civil war violence of the underprivledged.

    This mentality of money is a game, survival of the fittest … balance always comes to be, not always peacefully. Of course the richer you are, the more secure.

    How much money does it take to feel good? Was looking at a Architectural Digest yesterday at the doctors office. Nice homes, that someone got paid to build, and someone gets paid to clean. Consumerism at work.

    The real problem is too many people that lost jobs to machines. Add an expensive advanced education to play the big game. Add big money startup to play in a manufacturing business (the root of commerce). I know the world needs the Wall Street Market. And Wall Street needs real producers. I know everyone can’t push money for a living.

    The mix is getting dilluted. We’ve been filling this void with stuff, that is loosing its flair and isn’t portable enough in these times.

    Not the thread – but anyway – what do you think of a diminishing interest scale for savings / money in the bank?
    Say 5% for upto a million. 4% for upto a billion. 3% for upto 20 billion.
    Something like that would get cash doing what cash does best, CIRCULATE. Stop saving it to become numero uno after the crash.

  23. zack commented on Mar 23

    For many years, I’ve been a chartist, after the model of Dr. Elder, with some refinements.

    But, back in 2003, I hired a value-oriented advisor to manage half my money, precisely because they *didn’t* think like me.

    When I’d get my trade slips in the mail, I’d be horrified because they’d buy these charts that were hanging in the middle of nowhere.

    They put on a small handful of positions, I’ve only seen them sell one stock in 4 years.

    But I have to admit, their results have been spectacular over the last 4 years.

    So now I am going back to take another look at value strategies, if for no other reason than to have another arrow in the quiver. Wondering if combining this with TA would provide an added measure of safety.

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