Page 97 - THE MARKET WHISPERER

THE MARKET WHISPERER 95

was possible to rely on economic data for the long term. In the past, it
wasn’t possible to change the rules of the game overnight. When a mega-
corporation like General Motors or IBM presented good balance sheets, it
was clear that no competitor could surface overnight and take their top

status from them. Therefore, these economic data points were reliable for
the long term. To compete with GM or IBM, an unimaginable investment
would be needed, therefore in the short term, no change could be expected

that would endanger the investor too greatly.

In today’s technological reality, every young entrepreneur living in
student dorms can topple a conglomerate like IBM from the top of the
pyramid. Remember when IBM preferred to develop hardware, and
some young guy named Bill Gates developed DOS for them? Just check
Microsoft’s market cap against IBM’s to understand how the world can
change. And who used technological innovation to topple Microsoft from

its top position as the company with the largest market value? Apple, which

was dormant for years but reached new peaks with the iPhone and iPad,

leaving Microsoft behind at the curve. And what of Google, sprinting ahead?
Will Facebook, breathing hard down Google’s neck, overtake the lead? In
the current business world, any technological or biological innovation can

change market structure overnight. The days when our parents would buy
a stock such as IBM, place the paper deed (yes, once upon a time a written
deed was issued to the stock owner) beneath their pillow and go to sleep

knowing all would be fine, have long since disappeared. Nor have we yet

begun to discuss the impact of wars and terror attacks…
I believe that long-term investment is dead, together with the world

of absolute control and the fundamental economic analysis method. The

short term is what to watch, which is why technical analysis is currently

the controlling method. We live in a time when we need to trade with
fast changes and remain wary of dangerous long-term investments. The
technical trader who buys stocks that unfortunately move in the wrong

direction (yes, that can happen, too) realizes he or she has erred, sells

them and moves on to the next stock. When fundamental investors buy a

stock, they hold onto them for as long as it has yet to be proven that the

fundamental economic data have altered. Such investors believe that the

stock’s value is actually higher than its market value, and therefore when

it drops in price, it can actually increase their holdings. It’s true that not so
many years ago, the method did work. Remember the dot-com bubble that
burst in 2000? That’s where the method stopped working. That’s where

the technical trader profited from shorts and the fundamental investor