Have you ever noticed how some words in
English language are so perfectly named for what they describe? And how some words seem to be, I guess you could say, backwards? For instance, word sunflower! How wonderfully aptly named is sunflower, that beautiful yellow flower that follows sun from sunrise to sunset.And then there are those words in English language where there meaning appears to be backward, so to speak - like parkway and driveway. When my car is parked at home, I would think it would be parked on, well, a parkway - and when I’m on road driving somewhere, I would think I’d be driving on a – a driveway.
In stock market world, I think word analyst is a perfect word in English language and stockbroker sounds right to me, too. And this leads me to what I call ‘brainwashing mantras’ of Wall Street.
The brainwashing mantras of Wall Street may take form of a number, such as a stock rating of 1, 2, 3 etc. Or mantras may be a star, 1 star, 2 stars etc. The mantras may be a word or a group of words- attractive, unattractive, neutral, market perform, market out-perform, market under-perform, market under-weight, market equal weight, market over-weight, sector perform, strong buy, buy, sell, strong sell.
These mantras are so ingrained in Wall Street and investor’s minds that they have created multi-billion dollar industries. There are other types of mantras, such as RSI (relative strength index-a trading volume indicator), Bollinger Bands (named after its creator John Bollinger (he use to be a regular on CNBC) and bands deal with channels a stock trades in, in relation to its ‘moving average’- another mantra), Stochastics (used to tell if a stock is 75 % overbought - too many people have been buying) or 25% oversold (too many people have been selling), Momentum, MACD Convergence/Divergence- price of stock, up or down, in relation to its moving average), 50 day, 200 day moving averages, triple bottoms and tops, pendants, flags, bear and bull markets, head and shoulders formations, double bottoms, P/E ratios etc, etc, etc, etc.
All these mantras serve a purpose (and if you’re inclined to trade in market they are, I admit, useful tools) - they create commissions.
And in my opinion, have no meaning what-so-ever for long-term, dollar-cost averaging, buying investor of company’s shares, free of commission charges, whose companies raise their dividend every year, with investor’s idea or purpose being to provide an 85% tax-free income, through ever-increasing dividends for rest of their lives, no matter what price of stock at any given time in market place may be. (Whew! What a sentence!)
Here’s another mantra that comes to mind – ‘consensus estimates’. The analysts that follow a company on Wall Street created this mantra. There may be three analysts or thirty analysts following a company and a consensus estimate of company’s next quarterly earnings will be projected from these analysts. For example, last quarter company XYZ had record earnings of 90 cents a share. The company’s consensus estimate predicted by analyst for next quarter is for one dollar a share. XYZ on day earnings are to be announced is selling at $40.00 a share. The earnings for company are reported during day and XYZ reported making 95 cents a share, missing analyst consensus estimates of one dollar and stock immediately drops to $38.00 a share. Never mind that XYZ had just made another quarter of record earnings, never mind that XYZ is paying a 4% dividend and has raised their dividend for past twenty-five to thirty consecutive years (and three months from now normally scheduled dividend increase will occur; after all, they’ll have money to raise it again, with record earnings and all).
