Page 90 - THE MARKET WHISPERER

88 PART 3 - Market Analysis Fundamentals

risen too far, proclaiming it a “winner.” Then they step in and buy. Who,
in your opinion, is selling to the public at the high price? That’s right: the
professionals. Even if the stock does continue rising, the public will tend to
overstay, the stock will start to drop, and the public will absorb the losses.

The Role of the Professional

The pros have a clear role: they take the public’s money. And they have
plenty of creative ways to do that. Their biggest advantage is the fact that
they’re pros. That’s their profession. The public generally arrives at work
in the morning, answers phones, writes e-mails, and believes its money is
hard at work. The public receives a salary at the end of the month, because
each member of the public has a profession. Each person earns his or her
income because of an advantage that has no connection to the capital
market.

As with the public, so too with the professional: the pro knows that
the public will behave in a certain way. The public feels pressured
and sells hysterically when the market comes close to a low, and buys
enthusiastically when the market’s upward movement is already too tense
and about to correct.

Stock exchange trading is my profession. It’s a profession that does not
require knowledge of economics, but rather of psychology alone. In fact,
the less you know about economics, the better off you are. As an amateur
psychologist, I know how to predict the public’s behavior. The simple
outcome is that if both of us invest in the market, the probability is higher
than in most cases I will come out the winner. Just as I cannot replace a
professional in some other field, there is no reason to assume that such a
professional can replace me in my sphere and take my money.

The professionals are not mere stock traders. They are also fund
managers and investment bankers and anyone who makes a living from
the capital markets. They also have creative ways of taking the public’s
money. They manage it in return for management fees, commissions,
and other kinds of income without ever promising any results! Based on
the past, we can see that over the last twenty years, 80% of the world’s
managed funds earned their clients less than market index yields: in other
words, fund managers know they are taking the public’s funds in vain, but
with every advertisement they continue to promise: “Give us your money
and everything will be fine.”

One simple and valid conclusion can be drawn in respect to every
profession in the world: amateurism costs money, professional brings