Fundies Fundies Fundies!!!
Toddo and I were just chatting on the phone and talking about all the new features that will be rolling out on the site soon (frankly, and I know I'm talking the house book here, they are incredible). The conversation came around to fundamental analysis and I lamented to Todd that I sure miss writing about it. Then I thought I'd post a thought I think is worth relaying.
I spent my entire Wall Street career on the sell-side as a research analyst; parsing income statements, analyzing competitive threats, checking the sales channel, dissecting cash flow statements and balance sheets, testing products, casting a jaundiced eye on business plans, calculating valuation targets, and querying managements. For 9 years I did that and nothing else. And I loved it.
But here's the rub: that skill set has been worthless since 10/10/02. Heck, it's been a downright liability. I can't tell you how many times, after sizing up the relative fundamental merits of a company and its stock and coming to the conclusion that company A is far better positioned and valued than company B, the stock of company B soared while the stock of company A languished. That was the case, literally, every single time I used fundamental analysis in the last 18 months.
You have seen me write about technical analysis, about Fed policy, about macroeconomics, about the bond market. But I have purposefully NOT written about a specific company or stock based on the fundamental outlook. Because it wouldn't have helped you make money in stocks (except to the extent you did the opposite of whatever fundamental conclusions I came to).
The Fed has seen to that: by skewing the risk environment via reflation, they purposefully created an environment where the riskier assets performed best. In short, liquidity has trumped fundies. One outcome of that reality is that fundamental analysis became far less valuable as a relative stock picking tool. Someday it will matter, and you'll see me take that particular arrow out of the quiver again.
Its place in the new Minyanville site will be well worth waiting for. Its usefulness in picking stocks will be too.
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