Which one do you use? Technical or fundamental analysis?

BSD · 9 July 2006

Re: Which one do you use? Technical or fundamental analysis

Only $650USD per book to learn how:

"go "beyond Gann" to explore how you can use the cosmic clock for better market timing."

"Looking back, it is now easy to appreciate why Gann chose not to reveal his findings in the Bible, instead he used the bible codes to hide his methods, until the world was ready for them." (are we ready now?)

" bible codes that reveal exactly what Gann found in the bible and how to apply them to the decoding of TTTTA and other texts."

From a book that has:

"no claims to being the holy grail of trading, but it does present a refreshing perspective about using the cosmic clock for better market timing."

Do the stars only predict the DOW?

What about copper, residential property or the ASX?

What about markets that didnt exist when they wrote the bible? - oh, hang on.

Can Gann and Astrology tell me which team will win the NRL in 2006 and by what margin will they win the final?

Are you willing to underwrite any losses - or do the stars let us down sometimes?

But then again:

"At last, the private investor now has the
opportunity to use some cutting edge trading
tools, before the funds and brokers"

Where do I sign?

Bobby · 9 July 2006

Re: Which one do you use? Technical or fundamental analysis

tech/a said:
Bugger off I"M HEAD GURU.

Yep Tech you still have my vote, there's is no subterfuge in your repertory of lecture themes

Bob.

nelly · 9 July 2006

Re: Which one do you use? Technical or fundamental analysis

Hi y'all
Thanks,ta.... NettAssets and WayneL....
quote I think you have probably seen it said before - the only stoopid question is the unasked one that kills you in the market.
Regards
John
Yes I know I have to ask.....and will, but reading these threads can be intimidating at times, only because I don't know what you are talking about half the time [terminology break down]....I have a basic understanding...and aren't doing too bad in the Share Cafe comp......and I'm sure learning a lot reading the threads and will stock up on the appropriate books.
I'm looking at investing some time next year ...money I can afford to lose.
Thanks again.....

Realist · 9 July 2006

Re: Which one do you use? Technical or fundamental analysis

professor_frink said:
"I am no longer an advocate of elaborate techniques of security analysis in order to find superior value opportunities. This was a rewarding activity, say, 40 years ago, when Graham and Dodd was first published but the situation has changed ... [Today] I doubt whether such extensive efforts will generate sufficient superior selections to justify their cost"
from pg 198 A Random Walk Down Wall Street by Malkiel. Realist, I'm curious to hear a response to this comment, considering alot of your opinions on the financial markets come from graham's teachings.

Well first of all most all of my financial opinons agree with Graham, I got them from Graham obviously and I follow him as much as I can. The only thing I do that he wouldn't is buy something that I believe is excellent even if I paid a bit much for it.

Secondly, I do not use elaborate techniques, neither did Graham so that sounds very fishy to me. I look at profits and assets and ignore future prospects and analysts opinions instead looking at the past - that aint elaborate, infact it is as simple as you can get.

If Graham doubted himself later in life it does not mean he was necesarily wrong in the first place. I know Warren Buffet does not now doubt Graham at all, and still says his methodology is 85% Graham, 15% Fischer (buying excellent companies even if you have to pay a little too much - Tesco, Gillete??)

So if he did say that exactly and does not believe his methodology would work now, then I personally disagree - I believe he was right, and still is right. And I will until I die follow his methodologies unless I come across something better. That I doubt, but I will not rule it out.

The great thing about Graham is most people did not and will not follow his methodology, they never will. Most people either do not agree with him or are not patient enough to value invest.

Finance professors, top analysts, top brokers, almost everyone in the market today does not totally agree with Graham. The only people I know of who do are Buffet and his mates and Jason Zweig, oh and me.

Is there anyone on this bored who agrees totally with Graham apart from me?

Finally, he is not perfect, so some things he said must have been wrong, I do not know of any, but he may have been wrong about something. But there is no question his general theory is pretty watertight. And if followed you will at least make a profit and not a loss over the longterm.

Your thoughts Prof Frink - do you think his theories are wrong??

Realist · 9 July 2006

Re: Which one do you use? Technical or fundamental analysis

Prof Frink, here's the Graham interview...

http://www.bylo.org/bgraham76.html

To me quite clearly he states that "elaborate techniques" are no longer required - because all the information is now presented clearly.

Do not forget in his day you had to work out PER's and P/B ratios yourself.

So all he is saying is the information is now available so the individual investor does not need to go fishing about through company books to elaborately work out all their ratios - they are given to you now for all to see.

In now way does he state value investing is not a practice one should do now.

Realist · 9 July 2006

Re: Which one do you use? Technical or fundamental analysis

Julia, here is something for you, a quote from Ben Graham.

Maybe I was wrong..

Ben Graham said:
The investor should have a definite selling policy for all his common stock commitments, corresponding to his buying techniques. Typically, he should set a reasonable profit objective on each purchase--say 50 to 100 per cent--and a maximum holding period for this objective to be realized--say, two to three years. Purchases not realizing the gain objective at the end of the holding period should be sold out at the market.

This is something I do not agree with, and can not believe Graham said it!!

Selling a great company because the market has not realised its success or potential yet (price not gone up) or it has realised its success (price gone up quite a bit) to me is not logical. You're left with a tax bill for one.
And you now have money you need to reinvest in something else which is just as likely to not be recognised by the market if you are value investing.

The con argument is you get one life, what if you were wrong and waited 30 years for nothing?

But I say diversification prevents that. If 5% of your money is in one company that pays dividends but never goes up over 30 years it is no big loss and as safe as a bank deposit. And the chances of you investing in several companies that last 30 years and never recognise their potential is zero.

Hmm food for thought.

He must have gone senile in his later years..

mit · 9 July 2006

Re: Which one do you use? Technical or fundamental analysis

Realist said:
Prof Frink, here's the Graham interview...

http://www.bylo.org/bgraham76.html

To me quite clearly he states that "elaborate techniques" are no longer required - because all the information is now presented clearly.

Do not forget in his day you had to work out PER's and P/B ratios yourself.

So all he is saying is the information is now available so the individual investor does not need to go fishing about through company books to elaborately work out all their ratios - they are given to you now for all to see.

In now way does he state value investing is not a practice one should do now.

Ah, Malkiel is being misleading by quoting out of context. I'll write 100 lines not to trust third party sources.

He is a must study for many in the "professional" market another reason not to bother with an applied finance degree.

yogi-in-oz · 9 July 2006

Re: Which one do you use? Technical or fundamental analysis

MichaelD said:
Err, no your own presented evidence doesn't show what you are claiming at all. The tables you have presented show;

Gann: 1984H Very high stock prices, etc
Gann: 1985J Major panic-CRASH!
Gann: 1989K Extreme low, strikes, despair, unemployment, etc

Actual: Oz: 1984: Continuation of bull market from 1982 - 1987
Actual: US: 1984: Bull market from 1980 - 1987
Actual: Oz: 1985: Bull market until October 1987
Actual: US: 1985: Bull market until October 1987
Actual: Oz: 1989: End of post crash bull market, not extreme lows at all
Actual: US: 1989: Back up to pre-crash levels

Gann: 2004J Major panic-CRASH!
Actual: Oz: Greatest bull market in history.
Actual: US: Flat Bear Market at around all time highs

That's 0 from 4. Not so good methinks.

----

Hi Michael,

Just to clarify that table ..... you will notice that the
years were split into division determined by the
same depth as the explantion of the table legend.

Each letter was only shown on the top line but applies
to ALL years, in that section ..... and to verify that, you
can see, that under "J" he expected a crash within that
3-4 year period ... 1987 was a crash and 2006 is heading
that way .....

Text acompanying that table also verifies that stance.

It's still not a bad effort, given that forecast was made in 1909 !~!

happy days

yogi

Staybaker · 9 July 2006

Re: Which one do you use? Technical or fundamental analysis

Realist said:
Is there anyone on this bored who agrees totally with Graham apart from me?

Ha ha, was this an intentional pun or a Freudian slip?

Cheers, Staybaker.

MichaelD · 9 July 2006

Re: Which one do you use? Technical or fundamental analysis

yogi-in-oz said:
Just to clarify that table ..... you will notice that the
years were split into division determined by the
same depth as the explantion of the table legend.

Each letter was only shown on the top line but applies
to ALL years, in that section ..... and to verify that, you
can see, that under "J" he expected a crash within that
3-4 year period ... 1987 was a crash and 2006 is heading
that way .....

Even looking at it this way, with J=crash and A=start of bull market, taking only the US market and only from 1910;

Gann's predictions:
1911-1913 crash - Nope, wrong. Flat market.
1915-1918 start of bull market - Nope, wrong. Flat market.
1930-1932 crash - yep, just but stretching it (crash Oct 1929)
1933-1936 start of bull market - yep, Bull market.
1948-1950 crash - Nope, wrong. Flat market.
1952-1955 start of bull market - Bull market, but started in 1949. Gann predicted falling prices 1949 - 1952, not bull market.
1967-1969 crash - Nope, wrong. Bull market.
1970-1973 start of bull market - Nope, flat market.
1985-1987 crash - yep, even though it now looks more like a correction in a longer term bull market, not a crash.
1989-1992 start of bull market - Bull market, but started after 1987 crash. Gann predicted falling prices 1988-1989.
2004-2006 crash - No crash yet. 10% correction in a bull market is nowhere near a crash. Won't count this either way as 2006 isn't over.

crashes: 2 out of 5 right.
start of bull markets: 1 out of 5 right.

Total: 3 out of 10 right.

Conclusions:
1. Far worse than random.
2. Yell "the sky is falling" enough and sooner or later you'll be right.

Julia · 9 July 2006

Re: Which one do you use? Technical or fundamental analysis

Realist said:
Julia, here is something for you, a quote from Ben Graham.

Maybe I was wrong..

This is something I do not agree with, and can not believe Graham said it!!

Selling a great company because the market has not realised its success or potential yet (price not gone up) or it has realised its success (price gone up quite a bit) to me is not logical. You're left with a tax bill for one.
And you now have money you need to reinvest in something else which is just as likely to not be recognised by the market if you are value investing.

The con argument is you get one life, what if you were wrong and waited 30 years for nothing?

But I say diversification prevents that. If 5% of your money is in one company that pays dividends but never goes up over 30 years it is no big loss and as safe as a bank deposit. And the chances of you investing in several companies that last 30 years and never recognise their potential is zero.

Hmm food for thought.

He must have gone senile in his later years..

Realist

Well, thank you for being generous enough to post the quote from Graham even though it goes against your argument.

Why doesn't this make sense to you?

Basically, I agree with the philosophy of buying quality companies and holding for the relatively long term. Yes, it does make life simpler and avoids excessive tax and brokerage. No argument there.

If you'd simply accept that even the "best" companies are at times just not going to make you money and therefore be prepared to put your funds into something else until you see FROM THE CHARTS that the market has recognised the value of your favourite company, then you'd make a lot more sense.

Just take the example for the past year of WDC (one of the companies whose benefits of share ownership you repeatedly extol) compared with BHP.
Even with the recent downturn, BHP will have produced for you a far better result than WDC even with WDC's greater yield.

Over the last year WDC is trading lower than 12 months ago, while BHP has gone from $18 to currently around $28, with a $32 high before the correction.

Julia · 9 July 2006

Re: Which one do you use? Technical or fundamental analysis

Julia said:
Realist

Well, thank you for being generous enough to post the quote from Graham even though it goes against your argument.

Why doesn't this make sense to you?

Basically, I agree with the philosophy of buying quality companies and holding for the relatively long term. Yes, it does make life simpler and avoids excessive tax and brokerage. No argument there.

If you'd simply accept that even the "best" companies are at times just not going to make you money and therefore be prepared to put your funds into something else until you see FROM THE CHARTS that the market has recognised the value of your favourite company, then you'd make a lot more sense.

Just take the example for the past year of WDC (one of the companies whose benefits of share ownership you repeatedly extol) compared with BHP.
Even with the recent downturn, BHP will have produced for you a far better result than WDC even with WDC's greater yield.

Over the last year WDC is trading lower than 12 months ago, while BHP has gone from $18 to currently around $28, with a $32 high before the correction.

Previous chart was obviously for WDC
Herewith chart for the same period for BHP

Julia

Bobby · 9 July 2006

Re: Which one do you use? Technical or fundamental analysis

MichaelD said:
Total: 3 out of 10 right.

Conclusions:
1. Far worse than random.
2. Yell "the sky is falling" enough and sooner or later you'll be right.

Keep up your posts MichaelD,

As your judicature of the above was prudent.

Bob.

Realist · 9 July 2006

Re: Which one do you use? Technical or fundamental analysis

Julia said:
Just take the example for the past year of WDC (one of the companies whose benefits of share ownership you repeatedly extol) compared with BHP.
Even with the recent downturn, BHP will have produced for you a far better result than WDC even with WDC's greater yield.

Over the last year WDC is trading lower than 12 months ago, while BHP has gone from $18 to currently around $28, with a $32 high before the correction.

There is no question that BHP was a better buy than WDC a year ago. The results speak for themselves.

I own both, and I own more BHP than WDC.

But...

First of all an investor needs to be safe and avoid losing any money, therefore they need to diversify across sectors, so having both BHP and WDC is what I recommend. Having all your money in Resources and none in property is insanity.

The very fact that BHP has gone up more in the past year can make it a worse buy than WDC - because you are paying more now and getting less obviously. And because BHP has gone up more it makes it more likely to go down than WDC. Others will disagree, but when the resources bubble bursts and it will eventually, BHP (already the 15th largest company in the world and valued at over $100 Billion) will fall alot. WDC can not fall alot in my opinion, it is valued at $30 Billion, and just think of the rock solid assets it has, it has some debt but nothing abnormal. WDC is solid as a rock and well managed from what I can tell.

You will not ever get amazing growth from WDC, however you own the worlds leading retail property company, it is rock solid, and pays excellent dividends.

If BHP goes to $35 later this year I would not buy it, and probably even consider selling it. If WDC goes down to $16 I will buy more.

We've had good bull runs for a few years now. WDC will come into its own when a bear market comes, the resource bubble bursts and property booms. It is not a question of if, more when. All 3 will happen - everyone knows it.

So basically I am advocating 5% of your portfolio should be in WDC. You wont get amazing returns but you'll never regret it either.

I'd also advocate 5 to 10% of your portfolio now in both BHP and RIO - but on the understanding if the price goes up too much more it aint worth buying and is worth looking at selling. They do not pay great dividends and are certainly not as safe as houses. No company valued that high and reliant on commodity prices is.

Realist · 9 July 2006

Re: Which one do you use? Technical or fundamental analysis

Staybaker said:
Ha ha, was this an intentional pun or a Freudian slip?

Cheers, Staybaker.

I come here when I'm bored.

Which is quite alot recently..

Well it is winter, I like beaches, golf, bbqs, cricket, so you wont see me much in summer - if you are lucky.

Realist · 9 July 2006

Re: Which one do you use? Technical or fundamental analysis

Julia said:
If you'd simply accept that even the "best" companies are at times just not going to make you money and therefore be prepared to put your funds into something else until you see FROM THE CHARTS that the market has recognised the value of your favourite company, then you'd make a lot more sense.

I wouldn't be making sense, I'd merely be agreeing with you Julia.

I do not use charts to buy a company - pure and simple.

If I was to buy a business outright for myself, lets say a lawn mowing business for sale for $400,000 that makes $50,000 a year profit after all expenses including staff that run it. I would first look at the past 10 years profits, I'd look at the assets, debts, expenses, staff and customers it has, I'd look at competitors and the local business environment and residents in the area. I'd do some maths then maybe buy it.

I would not look at any graph whatsoever. Completly irrelevant to me.

How would you review that business before buying it??

cuttlefish · 9 July 2006

Re: Which one do you use? Technical or fundamental analysis

Realist said:
Is there anyone on this bored who agrees totally with Graham apart from me?

I believe Graham's investing approach works - but I'm not sure that your investing approach and Grahams approach have that much in common. You seem to be using a mix of approaches from everywhere with a bit of guesswork thrown into the mix, and advocating it as a Graham based methodology.

professor_frink · 10 July 2006

Re: Which one do you use? Technical or fundamental analysis

Realist said:
Well first of all most all of my financial opinons agree with Graham, I got them from Graham obviously and I follow him as much as I can. The only thing I do that he wouldn't is buy something that I believe is excellent even if I paid a bit much for it.

Secondly, I do not use elaborate techniques, neither did Graham so that sounds very fishy to me. I look at profits and assets and ignore future prospects and analysts opinions instead looking at the past - that aint elaborate, infact it is as simple as you can get.

If Graham doubted himself later in life it does not mean he was necesarily wrong in the first place. I know Warren Buffet does not now doubt Graham at all, and still says his methodology is 85% Graham, 15% Fischer (buying excellent companies even if you have to pay a little too much - Tesco, Gillete??)

So if he did say that exactly and does not believe his methodology would work now, then I personally disagree - I believe he was right, and still is right. And I will until I die follow his methodologies unless I come across something better. That I doubt, but I will not rule it out.

The great thing about Graham is most people did not and will not follow his methodology, they never will. Most people either do not agree with him or are not patient enough to value invest.

Finance professors, top analysts, top brokers, almost everyone in the market today does not totally agree with Graham. The only people I know of who do are Buffet and his mates and Jason Zweig, oh and me.

Is there anyone on this bored who agrees totally with Graham apart from me?

Finally, he is not perfect, so some things he said must have been wrong, I do not know of any, but he may have been wrong about something. But there is no question his general theory is pretty watertight. And if followed you will at least make a profit and not a loss over the longterm.

Your thoughts Prof Frink - do you think his theories are wrong??

I've got graham's book, but haven't read all of it yet. Longer term investing is something that I'm looking at for a future wealth creation strategy(I'm 25 now), but will most probably be used alongside my trading, never in place of it. I'm not quite sure if I'd go down the fundamental investing path, or develop a longer term trading method(something similar to tech/a's approach). At this stage, I don't have a strong opinion either way of Graham's theories, as I haven't finished the book, or read much else on the fundamental approach.

From reading the first part of his book, I can see why you have the opinion you do about traders! This attitude may have been appropriate when the book was written, but times have changed alot. Computers, charting software with backtesting capabilities, and the internet have given traders the opportunity to be just as profitable as investors. So these kinds of theories that he has I don't necessarily agree with, but can understand, given how old the book is. Because of all the information that is out there today, I find your attitude about charting slightly odd, but it's a personal decision- I'm not going to try and get you to look at them! I think alot of investors could benefit greatly from longer term charts(weekly and monthly charts for example), and I'm sure alot of investors do.

And I will until I die follow his methodologies unless I come across something better. That I doubt, but I will not rule it out.

This comment I find interesting. You state you would look at something if it was better, yet whenever people are talking about other methods of profiting from the market, you bring out the quotes from Graham to try and discount them
You'll never know if there is something out there with the potential to improve your results if you discount it without really looking at it! And buying a book by Guppy isn't looking at trading(although you will get alot of waffle about guppies swimming with sharks and fishing).

Realist · 10 July 2006

Re: Which one do you use? Technical or fundamental analysis

professor_frink said:
This comment I find interesting. You state you would look at something if it was better, yet whenever people are talking about other methods of profiting from the market, you bring out the quotes from Graham to try and discount them
You'll never know if there is something out there with the potential to improve your results if you discount it without really looking at it! And buying a book by Guppy isn't looking at trading(although you will get alot of waffle about guppies swimming with sharks and fishing).

I read Guppy's book, well most of it, and Leon someone from Tasmania's book - about a third of that. I noted both said most (90% even) traders lose money. I also laughed when they said "buy and hope" is the riskiest way to invest. Leon in particular had no understanding of Graham or Buffet's mentality at all.

I do not like the fact that traders would buy into a company because others like it currently and are buying it themselves so the price is rising. But if for some reason it dips, sell quick in case it freefalls and move onto the next hot item.

That just is not me.

When pink shirts were in fashion I never bought one, if flares come into fashion and everyone wears them I wont. I am not a follower of the crowd. I'll go against them if anything.

Most people invest in things when they are going up and sell when they are going down. I don't.

Show me a share in a good company that has gone down quite alot and I'd be keen to buy into it, show me a share that has rocketed up recently and I wont touch it.

I open to any suggestions on trading books or investing books - I am willing to learn. I am yet to see anything better than Graham's ideas though - maybe I will, I hope I will, that would be a life changing moment for sure.

Realist · 10 July 2006

Re: Which one do you use? Technical or fundamental analysis

cuttlefish said:
I believe Graham's investing approach works - but I'm not sure that your investing approach and Grahams approach have that much in common. You seem to be using a mix of approaches from everywhere with a bit of guesswork thrown into the mix, and advocating it as a Graham based methodology.

What does Graham do that I don't and vice versa??

I wont sell easily - he would apparently, and I will pay slightly too much for somethign that is excellent, he wouldn't. what else?

Which one do you use? Technical or fundamental analysis?

BSD

Bobby

nelly

Realist

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mit

yogi-in-oz

Staybaker

MichaelD

Not fooled by randomness

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