Thursday, September 3, 2015

"Most market moves are random, much as the news media hates to admit it."

The title of this blog was pulled from an article penned Monday by Felix Salmon of The piece has been making the rounds this week and we think it carries some degree of merit:

"In America, by contrast, the many, many problems with stock-market reporting have less to do with individual investors getting panicked and selling their stocks. That kind of behavior actually happens much less than it used to, partly because individual investors are a much smaller proportion of the market, and partly because the “don’t panic, you’re invested for the long term” message has finally gotten through to a large proportion of the investor base.

The problem, rather, is that the message has not gotten through to the overwhelming majority of Americans – people who don’t individually invest in the stock market. Most Americans have no stock market savings, either because they don’t have any savings, or because they don’t invest their savings in stocks. When these people see reporters breathlessly talking about markets going up and markets going down, they reasonably enough conclude that this news is important. The result is that a lot of Americans end up feeling stupid, because they don’t really understand what all the reports mean, and also because the reports themselves have almost zero useful or important information in them."


As the article and the above passage suggests, investors today are flooded with a seemingly non-stop flow of intimidating market related news.  While some intraday and day-to-day happenings can contain relevant data that will impact market direction, much of it should be written off as noise that contributes absolutely nothing to the long-term direction of stocks.

While we realize that this blog could be categorized as one of those outlets, we make every effort to be deliberate in our commentary and keep our opinions and biases out of the equation.  Certainly we'll always have them but we're smart enough to know that 1) they don't mean a thing in the larger scheme of things and 2) there's a huge risk of them being wrong.  So why try to force our thoughts upon anyone else?  Our goal is to simply share data and observations and then allow our readers to draw their own conclusions if they so choose.

We think Salmon's article brings up some valid points for consideration.  Every investor/trader has (or should have) a process in terms of how they make buy and sell decisions.  Perhaps they should incorporate into this process a set of rules for how they consume, filter and identify the endless stream market related news available to them.

Something to think about the next time you perform an evaluation of your investing process.

Ryan Worch is the Managing Director of Worch Capital LLC. Worch Capital LLC is the general partner of a long/short equity strategy that operates with a directional bias and while emphasizing capital preservation at all times.

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