Probably the most annoying e-mail I get in response to my Fribbles is from my fellow engineers. They are always correcting me on things. One helpfully pointed out that I used the word "proof" incorrectly (he then explained to me what a mathematical proof was); another wanted to know what formula would work for buying small-cap growth stocks. There were others too, but they all have a common irritating denominator. These engineers expect things to make sense.

Contrary to popular belief, most of us engineers did have dates in high school; sometimes they weren't even "blind" dates. We didn't all wear Mr. Spock ears and Star Trek shirts, and we didn't carry big calculators on our belts in college (at least past Freshman year). What is true about us is we expect everything to have a reason. So, if you non-engineers will please step back for a second, I need to explain some things to my colleagues.

The first thing I need to point out to you engineers is the principle of "accountability." As Scott Adams says in his "Dilbert" books, if an engineer is wrong it means death for innocent people and public humiliation, financial ruin (and possibly prison) for the engineer. If the engineer is right, it means a certificate in a plastic frame. For the Wise, being wrong means great financial loss (and possibly ruin) for many people and... nothing else. No repercussions, the media never remembers. If they are right it means you will never be allowed to forget it.

In 1987, Elaine What's-Her-Name and Martin Zweig predicted the crash. That was 10 years ago and they're still making lots of money off of that. Imagine if you could do the same? "In 1989, Laura Smith designed the structure of an office building in Bethesda, Maryland. For only $299 a year, you can have her words of wisdom faxed to you every week!" Sorry, Laura will just have to keep designing steel structures.

What else? Analysis is a good one. I keep trying to find a sure-fire way to value stocks, but there isn't any. The hardest part is the expected earnings. Analysts come up with these, and I wondered when I first got into this, how can they predict company earnings two years out? They can't really. It's a best guess which may or may not be any good. Even with good earnings estimates, some companies defy analysis. Read my posts on the Coke stock board. I keep trying to figure why it's so high in price, and predicting a "correction" any day now, and I am consistently wrong. A lot of this is psychology, which is hard to quantify.

While we are on quantifying psychology, there are all sorts of methods to predict the psychology of the market. The methods almost always involve graphic analysis, and it's called "Technical Analysis." I'll bet with a name like that, you think it's based on scientific studies, statistical analysis and so on, don't you? Nope. Technical Analysis is based on ways of reading the charts in ways that sometimes make sense, other times defy any explanation. What looks like a squiggly line to me is a "double bottom" to a Technical Analyst. Of course they can draw some lines to show you what they see. It's like some of the constellations in the sky. What you see as a couple of stars, the ancients saw as "Virgo the Virgin." Stare at the sky, or wiggly lines, long enough and you can probably see anything you want.

I can keep on going, but I'll stop with this last one. We engineers understand random movements. I once worked for a consulting engineering firm in Washington D.C. that among other things, tested concrete. Every now and then a concrete test would be lower than all the others. A panicky client would call, asking what it meant. "Nothing," I'd answer. "Just a random result." One bad result doesn't mean a trend. Tell that to the Wise! Watch CNBC when the market drops 100 points, or the "technology" sector drops. Talking heads will appear, predicting "the end of the Bull Market" or a "long-term correction in the technology sector." The next day, everything goes back up, and all the prognostications are conveniently forgotten. Not once does anybody tell Mark Haines, "it might be just random movement, we'll need some time to see if it's a trend."

(c) Copyright 1997, The Motley Fool. All rights reserved. This material is for personal use only. Republication and redissemination, including posting to news groups, is expressly prohibited without the prior written consent of The Motley Fool.