Regarding the financial media itself, choose a popular financial media outlet.  If it's a website, you'll likely see a parade of analysts with 50X50 pixel images.  Guys in ties and suits...shouldn't there be one disheveled data-analyst in the lot?  The occasional female analyst is likely to be downright gorgeous.  The guy with the white hair is the "financial safety" guy.  The trader guy has a "gung-ho" aura...as if he could cause stocks to rise via sheer willpower.

Most of the websites offer pretty much the same thing.  Quotes.  Company data.  Banal market commentary.  They all have the best charts.

Are any of these folks ready to say, "I don't know"?  How about, "well, we've got conflicting indicators, the outlook is rather murky at the moment, so we won't venture a guess"?  No...the commentary must sound authoritative, even if the information/sentence ratio is entirely minimal (in computer science, you might say the commentary has a very low Kolmogorov complexity).

Speaking of computer science, we've now entered an investment era where neural nets, genetic algorithms, chaos theory, game theory, behavioral science...and more...is being used to predict the market.  Wall Street is yanking physicists and mathematicians out of their universities left and right.  The same computers that model greenhouse warming, nuclear fission, and orbital mechanics, are being used to model the market. But where do ordinary investors stand in relation to these developments?  Has the reporting of the market changed at all in response?

How often does market commentary include phrases like "our data says..." or "studies show..."?  Almost never.  We find this simple observation to be astounding.  Even rarer would be commentary that considers the statistical significance of the findings in question.

How many of these gurus publish a model portfolio?  Starting around junior high school, we're taught that we should support our arguments with fact.  Somehow, a good number of market analysts believe they're above such requirements. Why should we believe anything they say?

April 6, 2004:  REIT's lost about 4% on this day, 3.5% on the prior day, and about 10% in the last week.  Given the normal lack of volatility in the group, these drops are rather extraordinary.  But there's no mention of this on the popular financial sites.  The really noteworthy item today, apparently, was the fact that IBM lost $0.48 off its $98 share price.

Our own website probes historical data for trends, seasonal and otherwise. The usefulness of historical data, of course, is a massive question and worthy of debate. Naturally, we get plenty of folks who tell us that such data is utterly worthless. With few exceptions, though, these folks then proceed to offer up a method that is supposed to transcend historical analysis and testing altogether.

Some of the analysts you see on TV made a reputation in the pits, working for various firms.  Maybe they just made a few lucky trades.  Maybe they made a lot of good trades in a particular historical environment that was suited to their particular investing philosophy.  Maybe they consistently made good trades in different environments for reasons they're not even sure of...we don't doubt the possibility of a strongly intuitive style of investing, but we are dubious that such an investment style could effectively be transmitted to the viewing public, particularly where short-term trades are involved.

And, of course, some of these guys are entirely full of crap, whether they know it or not.

At various times, we've attempted to contact various celebrity analysts to inform them of their errors (and yes, grab some potential publicity for ourselves).  It's nearly impossible, given the time they spend on air, writing books, promoting their videos, at banquets, and working the lecture circuit.  It's a miracle they have any time at all to study stocks and markets.

One time, we did manage to get through to a prominent financial writer.  He had been spoon-fed the usual bunk about the January effect persisting through the middle of February (there is some truth to that if you go back to the 1950's and 1960's, but in more recent times early February has had the effect of stealing back some of your January effect gains).  We thought we'd correct him (politely).  No doing...we received a terse reply about "apples and oranges", given the different time frames being observed.  Presumably, his audience would like to make money, as opposed to cerebrating on market effects whose time has passed.

Let's look at some [paraphrased] jewels and translate them into English:

The market retreated due to its inability to break through its 50 day moving average.

Translation:  The market went lower because it didn't go higher.

I always find the trend to follow the projected line until it changes.

Translation:  Trends follow trend lines until they stop following the trend line.

A leading stock will generally post more up sessions than down ones

Translation: A stock that is going up goes up more than it goes down.  Generally.

We're in a consolidation phase.

Translation: The market is not going up or down a lot.

The S&P 500 opened weak but quickly found its low and began to rally. However, it was unable to hold on to its gains and then traded back and forth for the rest of the day.

Translation: It went down a bit, then it went up. Then it went down. Then it went up and down several more times.

Before you short a stock you're convinced will drop, first look at where the market is headed.

Translation:  If your crystal ball says the market will rise, don't short stocks.

Rant Part III (!!!)

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