Market Beat: Meaningless stock market phrases
August 10, 2012
TRUCKEE, Calif. andamp;#8212; Not too long ago, Business Insider came up with a list of their favorite meaningless stock market phrases. These are sayings that youandamp;#8217;ll hear repeated over and over on TV, which really have no meaning, but make the speaker sound like they are well informed and really donandamp;#8217;t want to say anything that commits them to an actual forecast. The original list from Business Insider contained about twenty phrases and here are a few of my favorites.andamp;#8220;Weandamp;#8217;re in a bottoming processandamp;#8221;This one sounds good because it implies that the market is going through a period where it goes lower, then eventually buyers will come in and it will reverse. Itandamp;#8217;s meaningless, because it does not forecast the future price action with any accuracy.andamp;#8220;More buyers than sellersandamp;#8221;This one makes no sense at all. Youandamp;#8217;ll hear when the market has gone up that there were more buyers than sellers. The truth is that there is an even match in the number of shares being bought and sold. You could have one big institutional buyer purchase 100,000 shares from hundreds of different individuals. Just because the market went up on a given day does not mean that there were more buyers than sellers.andamp;#8220;Thereandamp;#8217;s lots of cash on the sidelinesandamp;#8221;This one makes it sound like investors have sold some stocks; raised cash are waiting for an opportunity to re-invest. It sounds smart, but every time a stock is sold, the seller gets cash and the buyer gets the stock. The number of shares outstanding stays the same. andamp;#8220;Itandamp;#8217;s a stock pickerandamp;#8217;s marketandamp;#8221;Analysts will use this phrase when the broad market is not rising, but certain stocks or sectors are. The truth is, itandamp;#8217;s always a stock pickerandamp;#8217;s market. Identify the strongest stocks in the strongest sectors. Even in a bull market, there will be stocks and sectors that are out of favor.andamp;#8220;The easy money has already been madeandamp;#8221;Pundits will say this one following a market rally, like it was easy to know exactly when the bottom was. Itandamp;#8217;s never easy finding a market bottom and investing and requires patience and discipline.andamp;#8220;Stocks are down on profit takingandamp;#8221;When stocks are down there are a variety of reasons investors are selling and itandamp;#8217;s is not always all profit taking.Thatandamp;#8217;s just a partial list, but those are some of my favorites. When you listen to stock market reports on TV, take note of how often these and other meaningless phrases are used.Kenneth Roberts is a Truckee based Registered Investment Advisor. Information on his money management service can be found at http://www.fusiontargetretirement.com or by calling 775-657-8065. Past performance does not guarantee future results. Consult your financial adviser before purchasing any security.