Just down the road from here, on the way to the JSE, there’s a pleasant piece of open space, often occupied at weekends by dogs who have taken their owners to obedience classes. Today, as I went past, I noticed a pretty dilapidated caravan parked in one corner of the field. It was not on level ground but it was open for business. A bold sign promised “Advice on All Matters”
I did not stop.
But I did rather wonder if there’s much difference between what she (I assume the camper was a shrewd gypsy lady) and I do to pass the time. Using our experience and perhaps even skill we both attempt to foretell the future. I base my views on interpretation and extrapolation of historical data; she bases hers on observation of the client sitting before her. Naturally we are both in danger of telling our customers what they want to hear.
Some recent reading on the matter of the randomness of market behaviour has made me even more sceptical about the likelihood of success in this forecasting game. On average one should be correct about half the time. Statistically it is not improbable that one could come up with a string of successive – preferably spectacular – correct calls. One would soon be hailed as a market guru. And anxious investors would form an orderly queue outside the door. I saw no such queue outside the caravan either.
What we do have going for us in this investing business is the trend. Analysis of traders shows that, whatever method they use for making decisions, the “luckier” ones are those who stay with their winners for the ride but abandon their losers quickly.
And so, at last, to the market which after several weeks of exasperatingly static action does seem to be picking up downward momentum. The ongoing weakening of the resources is starting to swamp and flow through to the financials and industrials. The all share index is about back to the level where it started the year. (It has never been more than 7% above it) Pretty soon we could have a real trend showing through. And with one of those in place we can all look smart. Just remember to get some liquidity on board to make the trip more fun though.
And if you feel the need to call in at the caravan, please mind where you tread. Woof!
James Greener
7 May 2004
