Bulls, Bears and Goat Guts
Way back about 2000 years ago, the Roman seers examined the entrails of slaughtered goats to determine the future. What they looked for in the blood and guts is beyond me (and probably everyone else at the time), but important decisions were made based on those arcane practices. Other than Julius Caesar's assassination, though, I'm not aware of any true prediction that they made. Excuse my cynicism, but if Roman government was like government today, the seers probably based their predictions on rumors they heard in the marketplace. Sure, they *claimed* it was goat guts---wouldn't you? And I'll bet a denarius to a dollar they made a lot of money trading on their "revelations" later ("see Marcus Stupidious for your investment advice, he predicted Caesar's death on the Ides of March!")
Today, we're much less superstitious, at least in public. Most of us don't slaughter goats to determine the future, and while some of us read astrological predictions, we tend to make our investment decisions based on more scientific principles. Our modern-day seers claim to use proven "key economic indicators" to tell where the market is going, and they are always successful, except every now and then when they aren't. People use their revelations to get in or get out of the market, and according to these experts, lots of folks get rich by following their wise advice.
Of course I'm just a Fool, so I get confused sometimes. These "key economic indicators" seem a little on the arcane side to me. Such things as odd lot sales, short interest, investor sentiment, dividend ratio, advance-decline lines, percentage of money invested in stocks versus the Gross National Product, and so on. The "indicators" seem hard to figure out. They are compared to history, but history never repeats itself exactly. For example, my parents couldn't log onto a PC at night and get an instant annual report with earnings projections on a company. They couldn't buy stock through a discount broker, for that matter. These changes certainly have affected the way people invest, even if Fooldom itself is a relatively new phenomenon. Yet the "key economic indicators" from earlier times are supposed to be as valid today as they were 20 years ago. Huh? Why?
Ok, I admit I'm not a stock market guru, and I have never appeared on CNBC. However, I distinctly remember hearing stock market seers on that same esteemed network telling me to *sell* all of my stock and go to cash last spring. "The Great Correction is coming!" they shouted. Foolishly, I kept my money in the market, and watched my profits grow. These experts are still being quoted, and like the seers of old, their incorrect predictions are conveniently forgotten. Of course they all predicted the Great Correction of '87, so I'm surprised anybody lost money back then.
Will there be another "Great Correction"? I bet there will be. Will somebody predict it? Sure, just like somebody will hit the lottery, or the progressive jackpot in Atlantic City. If I was a Wall Street Seer, knowing the tendency to forget bad prognosticating, I'd predict a crash every week based on my readings of "key economic indicators," and when the crash came I'd tell everybody I predicted it. And I'd be right! At least once. Of course, as my 10th grade English teacher told me, I'm a Foolish cynic.
Being Foolish, I'll take my chances and keep my money in the market. I'm sure it'll correct at some time or the other, and I'll lose some money---it may be a little, it may be a lot. However, the market will come back, just as it always does. I don't have any goat entrails to check for that prediction, but I did check out the squished bugs on the Foolmobile radiator (198,500 miles now). Believe me, the "key indicators" are there in the bug goo. They tell me this: the market will correct and come back---some day. Being a Fool, I would rather risk losing money by being in a Bear Market than to lose money by not being invested in a Bull. Come to think of it, that does take a certain amount of guts.
by, GRunkle
Transmitted: 95-10-05