Thursday, July 17, 2008

It's About Education, NOT Information

For investors, a proper education and investing framework should always trump access to "immediate information".

I know that automated information aggregation, synthesis and analysis is all the rage on Wall Street these days. Banks, traders and hedge funds are all jockeying to get the news first, fastest and interpreted in the most efficient manner.

But with the announcement that financial "intelligence" firm, Monitor110 will be shut down, it gives me reassurance that TickerHound's on education as opposed to information was the right path.

Case in Point:

This is currently the top headline on Yahoo! Finance (the largest financial portal on the web in terms of traffic):

Stocks trade higher on upbeat earnings results - Stocks are opening higher after stronger-than-expected quarterly results from names like Coca-Cola Co., JPMorgan Chase & Co. and United Technologies Corp. gave investors some reassurance about the health of the economy.

Ok, now if I were a regular Joe, I'd look at that headline and think, "Oh wow, looks like JP Morgan is pulling through and doing well despite all the turmoil in the financial markets."

But that wasn't the case at all.

In fact, the company's year-over-year profits were off by 53%!

And the comments from the company's CEO, Jamie Dimon, weren't particularly optimistic either:

"the economic environment to continue to be weak -- and to likely get weaker -- and for the capital markets to remain under stress." He added that "since substantial risks still remain on our balance sheet, these factors will likely affect our business for the remainder of the year or longer."
I don't know about you, but that doesn't sound very encouraging to me.

But the stock still rallied - all because analysts expected JP to do even worse than they did!

Trying to trade stocks based on the assumption that "maybe this company won't do as bad as everyone thinks", is a sucker's game. The media creates headlines like this to get people to read their articles and watch their TV shows...fuck that!

Investors need to tune out and rely on their own experience and their own education to make money in this market.

Mr. Dimon pretty much said, "things aint gonna get better for a while now, so don't expect much from us." The CEO of a company says that and what I really hear is, "Hey, don't buy our stock right now, you can buy it later this year for much cheaper."

Education, not information my this bear market, don't let it play you!

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