August 25

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If He Really Knew…

Hang on to your hats for this week’s edition of Dave’s Reality Check.  I’m mad.

Here we go again…. 

I was just sent this article by a concerned client: 

Stock Market Crash Is Coming, These Ominous Technical Signs Reveal*

Feel free to take time to read the article in you are so inclined (link at bottom). 

So anyway, his “technical analysis” reveals BIG problems.  According to the author, as you can see on his chart, “The second peak in the corresponding pair of stochastics readings is lower than the first (with the stochastics remaining above the 90% threshold that indicates stocks are extremely overbought).” 

OH NO!  SELL SELL SELL!

If you feel dumb because you have no idea what that means: stop.  It has ZERO bearing on your financial security.

This article appears in TheStreet.com which is a very large and influential organization. 

Beyond the fact that his assertions are based on unproven, arcane algorithms, I want you to think about this whole concept for a second.

What concept? 

The concept that there is some “Super Duper Smart” person out there that knows when the market is going to go down (or up).

Let’s go down that road….

Let’s say that at some point in the past 100 years there was a Super Duper Smart guy (or girl) that actually COULD consistently predict when the market was going to go up or down.

Would that person be writing blogs for an investing website? 

Would that person be a financial planner working on Main St. in your local town?

Would that person appear on the news once a week with a market update?

No.

Logically, that person would be the richest person on Earth.  Why?  If this person DID have some magical ability to time the markets in a way that no one has consistently done ever before…

Wouldn’t he buy some large Caribbean Island and work from his house there (in his pajamas)?

Wouldn’t people from around the world be begging him to manage their money?  He could basically charge them whatever he wanted.

The Harvard Endowment fund contains $36.4 billion in assets.  Don’t you think they would be banging down his door?  “Please, Mr. Super Duper Smart guy!  Please manage our money!  We will pay you one BILLION dollars a year for doing so!”

The whole thing is completely nonsensical.    

No one has been able to consistently time the markets.  No one.   Ever. 

You need to reprogram your mind.  Anytime anyone says, “Based on my fancy analysis, be prepared for a bad year in the market.”

Or

“We see great things coming.  We think the oil industry is going to skyrocket in the next year.”

You need to say to yourself, “No, you don’t know that.  There is no way for anyone to predict what you are predicting.”

 

Have a Blessed week!

Dave

  

https://www.thestreet.com/story/13674455/1/a-stock-market-crash-is-coming-these-ominous-technical-signs-reveal.html

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