Page 95 - THE MARKET WHISPERER

THE MARKET WHISPERER 93

on the stock’s behavior as illustrated by graph alone.
Both methods attempt to predict price trends. As already noted, the

fundamental economic investor examines the stock’s value relative to

company performance and market performance, and concludes whether
its price is above or below its true value. If, in the long-term investor’s
opinion, the price is currently below its true value, he or she will buy, and

vice versa. The technical trader does not ask “why,” but tries to predict
price trends according to graphs, that is, results in the real-time field.

SMART Integrating fundamental economic analysis with technical
MONEY analysis is a winning combination. No method can
operate alone, while ignoring the existence and logic of
the alternative method.

At this point, I will cease being objective and say outright that I do not
believe in the sole credibility of one or another method. I believe that their
integration is the winning method. In reality, I choose to be 80% technical
and 20% fundamental. Most technical analysts arrived at this preference
through fundamental economic analysis. I can promise you that if you try
to earn profits by reading financial reports in newspapers and watching
them on television programs, you will discover sooner or later that you’re
wasting your time.

Why do most people believe in fundamental economic analysis?
Because we’re educated to invest in the long term. And why is that? Very
likely because someone has to make a living from teaching economics
in universities, because funds must find legitimate justifications for
erroneous purchases, because stock market colleges want to continue
existing, because we as humans must peg everything into some kind of
mathematical, organized framework, and because none of the educators
are willing to admit that basically, they know just about nothing even
when history indisputably proves that they’ve erred throughout the long
term! Teaching methods and attitudes have not changed over decades, and
sometimes even over centuries.

Most of those involved in the stock market define themselves as purely
fundamental or purely technical. In reality, there is no small amount
of overlap between the two methods. The problem arises when the
two methods oppose each other. History has proven that the technical
method has always preceded the economic analysis. Most of the largest
market trends occurring throughout history were ascribed no significant