Of Low Volumes And Fund Outflows From Long Term Mutual Funds

I was reading the following research: 3 Signs of a Sucker Rally.

Now obviously, without clicking the link, surely such an article would interest you too. No? I for one do not want to be made a sucker. And neither does my money want to be a sucker too. :P

(yaya.. much easier to say... "I am kiasu!" )

Ok. The article is rather technical but for what it is worth I paid much attention to the following section.

• Volume and Conviction
  
  Discernment of trading volume is one of the most basic components of technical analysis. High trading volume shows conviction, while low trading volume indicates lack of conviction. Trading volume is not a short-term indicator, that’s why we look at longer-term time frames.
  
  The chart below reflects the analysis of the NYSE trading volume over three time-frames.
  1) The October 2007 – March 2009 decline
  2) The March 2009 – April 2010 rally
  3) The post April 26, 2010 decline
  
  
  
  The daily NYSE trading volume from the October 2007 highs to the March 2009 lows averaged 1.48 billion shares. The daily trading volume from the March 2009 lows to the April 2010 highs average only 1.30 billion shares, a 12.63% drop. The trading volume since the April 26 peak averaged 1.59 billion shares, a 23% increase.
  
  What’s the essence of this analysis? Conviction associated with the March 2009 – April 2010 rally was limited compared to the declines that sandwiched the rally. According to trading volume, the March 2009 – April 2010 rally was a counter trend or sucker rally.
  
  If we drill a bit deeper, we see a large number of distribution days occurring since the April highs. Distribution days see the major indexes decline on large volume. Not only that, the rally that lifted the S&P (NYSEArca: SPY), Dow Jones (NYSEArca: DIA) and Nasdaq (Nasdaq: QQQQ) some 7% over the past two weeks has come on the lowest volume in nearly two months (see chart below).
  
  
  
  The conclusion we may draw is that not only has the larger trend turned down, the recent rally seems to be fizzling out as well.

I am sure you would have noticed the pattern too.

On 'up' days the stock goes up on thin volume and on 'down' days, the volume increases.

And logically, things should be bad when Jim Cramer starts talking about it. Jim Cramer Calls This A Bad Rally!

Like for example last night, the home sales were utterly shocking. See Yves charts: WORST HOME SALES NUMBERS EVER

But let's take the media comments. From CNBC Bob Pisani: Pisani: Why Builders Traded Up (!)

• Still, the numbers were a shock. The May new home sales number, at 300,000, is an all-time low (they started collecting new home sales in 1963). The number was 30 percent below analyst consensus of 430,000. April new home sales, which included the benefits of the tax credit, was also revised downward by 58,000; March was also revised downward.

So there's no denying the numbers are so, so, so bad but then as mentioned by Bob Pisani the builders traded up! LOL!

Stocks going up on bad news!

Bad news makes stocks trade up now huh?

And yeah they traded on ultra thin volume! LOL!

Which reminds me of the posting I made last month: Massive Funds Cashed Out Of Equities

let me reproduce the table...

And here is the latest update:

Look at 5/26. Two weeks after 'Flash Crash', ie on the week of 5/26, Americans pulled out a massive 13.4 billion out from long term mutual funds on equity. ( source: here ) (ps: if you are counting, that's 7 consecutive weeks of outflows)

Why?

Americans don't like their own stocks anymore?

How?

Me?

I have no idea if stocks would go up or down. :P

Trading: Is success guaranteed from INSIDER NEWS/TIPS?

Ah.. highly interesting development from the Galleon saga and here is the most interesting question from the saga.

Is success guaranteed from INSIDER NEWS/TIPS?

On CNBC: http://www.cnbc.com/id/33413204

• Raj Rajaratnam, the authorities say, masterminded one of the biggest insider-trading schemes in a generation.
  
  But if Mr. Rajaratnam was trading on insider information, apparently he was not very good at it.
  
  A close examination of the trades that led to his arrest last week reveals a startling fact: In all, Mr. Rajaratnam lost millions from what prosecutors characterize as illegal trading.

!!!

• One bad trade, in the shares of the chip maker Advanced Micro Devices, cost his hedge fund, the Galleon Group, $30 million. That loss more than wiped out the profits that prosecutors claim Mr. Rajaratnam and his accomplices reaped with their scheme.
  
  Prosecutors highlighted the winning trades in a case that they say stretched from the secretive world of hedge funds to some of the country’s biggest technology companies. They did not mention the losers.

LOL!

Irony.

In chats and forums, folks tend to highlight only their winning trades.

And yes, no one mention them losers!

• Profitable or not, insider trading is insider trading. And Mr. Rajaratnam, who maintains he is innocent, might have broken the law even if he lost money on his trades.
  
  But the fact that some of the investments soured, and that, in all, Mr. Rajaratnam lost money, could be powerful evidence for defendants. Inside information is, by definition, information that is material to investors, and thus could cause a company’s stock to move in a direction that will be obvious in advance.
  
  For example, if a company’s stock is trading at $75 and someone learns that the company will be taken over for $100 a share, that information would be material. But routine corporate news — a retailer announcing new store openings, for instance — is generally not considered material.
  
  “The violation is trading on material nonpublic information,” said Robert A. Mintz, a former federal prosecutor who now heads the white-collar defense practice at the law firm McCarter & English. “There’s no requirement that that trade results in a gain to the defendant. But if it turns out to have been a money-loser, it obviously gives the defense some fodder to argue that the information was not material.”
  
  Utpal Bhattacharya, a professor at the Indiana University Kelley School of Business and the co-author of a study on insider trading convictions from 1995 to 2004, said that convicted defendants had profited in every one of the cases he examined.
  
  “A loss is likely to weaken the prosecution’s case,” Mr. Bhattacharya said. But he added that prosecutors had wiretaps in which defendants expressed concerns about their actions, which could strengthen the case.
  
  A spokesman for the United States attorney’s office in Manhattan said the office could not comment beyond the criminal complaint or press statement from last week.
  
  That statement refers in its headline to a “$20 million insider trading case” and explains that Mr. Rajaratnam and other defendants “are charged in insider trading schemes that together netted more than $20 million in illegal profits.”
  
  A one-page graphic released by prosecutors mentions six trades made by Mr. Rajaratnam that netted Galleon, his hedge fund, total profits of $20.6 million.
  
  Missing from that handout is a 2008 trade that moved badly against Mr. Rajaratnam and Danielle Chiesi, who also is charged in the fraud case. Ms. Chiesi worked at New Castle Funds, another hedge fund, and is accused of supplying insider information to both Mr. Rajaratnam and New Castle.
  
  From August 2008 to October 2008, Mr. Rajaratnam ordered Galleon to buy at least 16 million shares of A.M.D., a computer chip maker, according to the federal criminal complaint against him and a related complaint by the Securities and Exchange Commission.
  
  During the same period, New Castle bought about 2.5 million A.M.D. shares, according to another criminal complaint that focuses on Ms. Chiesi.
  
  Galleon and New Castle bought the shares because Mr. Rajaratnam and Ms. Chiesi received information from an I.B.M. executive in August that the government of Abu Dhabi would invest billions of dollars in A.M.D. as part of a deal for A.M.D. to spin off its manufacturing facilities, according to the complaints.
  
  But the possibility of a deal between A.M.D. and Abu Dhabi had been rumored before Galleon and New Castle began buying.
  
  “Some analysts speculate that the spinoff will require a substantial investment from the government of Abu Dhabi,” The Austin American-Statesman reported on July 18.
  
  Galleon spent $85 million to $90 million on the 16 million share purchases that are disclosed in the two complaints, an average of about $5.50 a share. But as global stock markets plunged in September and October, A.M.D. shares sank too. By Oct. 6, Galleon’s shares in A.M.D. were worth only about $68 million, a loss of roughly 25 percent. On Oct. 7, A.M.D. announced its deal with Abu Dhabi. Its stock closed about 8 percent higher that day, but was still significantly lower than Galleon’s purchase price.
  
  Galleon then held on to nearly all its A.M.D. stock after the deal was announced, and A.M.D. stock resumed its plunge during the rest of October.
  
  The criminal complaint acknowledges that “most of the shares, however, were held until at least later in October 2008,” at which point A.M.D. stock was trading between $3 and $4 a share and Galleon had lost about $30 million. A person close to Galleon confirmed the figure.
  
  The fact that Mr. Rajaratnam lost money on the trades could mean he and other defendants will receive a short sentence even if they are convicted, said Steven D. Feldman, partner in the white-collar criminal litigation practice at Herrick, Feinstein.
  
  “The higher the gain, the higher the recommended sentence,” he said.
  
  Mr. Feldman added that prosecutors might choose to remove the A.M.D. transactions if and when they formally indict the defendants.
  
  Mr. Rajaratnam and the other defendants were arrested last week on a complaint from prosecutors. They have not been formally indicted, a procedure that requires a grand jury’s vote.
  
  Mr. Feldman, who once worked as an assistant federal prosecutor in the securities fraud department in Manhattan, said the lack of an indictment, as well as the fact that there were two separate complaints, indicated that the investigation might have been chaotic at the end.
  
  “Traditionally, you’re going to want to bring these cases by indictment,” Mr. Feldman said. “The fact that they didn’t is evidence they were rushed.”
  
  This story originally appeared in the The New York Times

Investing Or Trading In Gold In Malaysia

Some call it investing in gold. Some call it trading in call. :D

Some call it black, some call it white.

And one popular choice is them Kijang Coins offered by Maybank.

4 June 2009, I wrote the following posting. Did I Regret Not Buying Kijang Coins Back In December?

As highlighted in that posting, the actual performance of gold IN USD from 2nd December 2008 to 4 June 2009 saw gold increasing a whopping USD202.00 per oz or a very impressive 25.9%.

But the buyer of the kijang coins only saw a gain of only rm380.00 or just 12.2%.

Of course, as mentioned in that posting, a gain of 12.2% isn't too shabby. It's decent really, however, it pales in comparison to the actual movement of gold in USD.

Let me highlight back the table again.

Let's look at the two options offered. The buying of the actual Kijang coin itself.

Yeah, one can buy and store it all in one's Milo tin. Or you can even frame it all up. :D

Or you can just buy it in the form of the passbook.

Let's look at the coins.

Then selling price of the 1 oz Kijang coin was 3613.00. The buying price of 1 oz Kjang coin was 3499.00.

In layman's term, you buy from Mayban at 3613.00. And if you decide to sell back on the same day, Mayban is more than willing to buy back from you at 3499.00. The difference of 114.00 in the buy and sell price represents the cost of transaction in this 'investment' or 'trade' when you buy and sell Kijang coins.

Perhaps one might opt for the gold savings passbook. And as seen from the table above, there is the price differential of 8.49 between the buy and sell price. This is the cost of transaction in this 'investment' or 'trade'.

This is something one have to take note.

And of course, the kijang coins investment/trade is based on the price of gold priced in USD.

But then what one is paying in Ringgit.

Hence this variable is also important in this investment/trade.

Here is the chart of GOLD priced in MYR.

On 5th April, 1 oz Gold in MYR was priced at 3171. Today's price of gold is 3292. Gold appreciated 121.00 or 3.8%.

Here is the chart of GOLD priced in USD for the same exact period.



On 5th April, 1 oz of GOLD in USD was priced at 891. Today's price of gold is 932.00. Gold appreciated 41.00 or some 4.6%.

See the difference?

So it's not an 'easy' of no brainer investment/trade.

You have to watch the 'cost of your transactions'. And the each currency performance against the yellow metal is different. And needless to say, you have to take note of the performance of the ringgit against the USD too!

Market Tips And Observations

Posted by Dr. Brett. Ten Weekend Thoughts From Dr. Brett

I would say that these are 10 great market tips for all.

* Distractions come from unfinished business;

* I've yet to meet an impressive person who has needed to impress people;

* Passion without commitment is wasted energy;

* The early bird gets the worm; the night hawk gets the early bird;

* Success comes when doing things right is combined with doing the right things;
* When you are doing what you're meant to be doing, effort gives energy;

* In trading, as in life, you succeed by acting decisively on your convictions;

* You will never win if your goal is to not lose;

* Successful people are productive; they traffic in efforts, not intentions;

* Narcissism craves admiration; self-esteem desires understanding.

------------------------------------------------------------
Truly excellent as usual. I hope you like it. :D

• I've yet to meet an impressive person who has needed to impress people;

LOL! How indeed true.

One more from him. Trading and Investing: The Danger of Mixing Mindsets

• Several traders that I interacted with today were not able to participate on the long side despite the fact that the stock market was strong throughout the day. When they explained their selling bias, they said things like, "I just don't believe we should be trading up here" and "There's no way we are going higher; the economy is in terrible shape."
  
  Mixing the mindset of trader and investor is hazardous to your wealth. As an investor, I can tell you that I remain very conservatively positioned with my retirement assets. I believe that we entered a secular bear market in 2000, and I believe that bear market has years--not months--to run. Just as we hit bottom in 1932 and did not see a full fledged bull market until the late 1940s, and just as we hit bottom in 1974 and did not see a fresh bull until 1982, we could muddle around for a considerable period in a long-term bottoming process.
  
  And that's generously assuming that we made a price low for the secular bear in March!
  
  All of that, however, is irrelevant to what I think about the stock market *today*. If I see that there is no bearish bias over the next several days and that indicators are strengthening over a three-day period, I am going to look for reasons to buy in today's session if I detect signs of strength. Trading is about exploiting supply and demand during short-term intervals; it is not investing.
  
  You could tell me that President Obama is saddling this country with outrageous debt; you could decry the greed of banks; you could question the ability of the consumer to sustain a durable economic recovery; you could question the fundamentals of the U.S. dollar: for the most part, I would agree with you. But those have nothing to do with whether institutional participants, right here and right now, are purchasing, selling, or avoiding equities.
  
  There's a time for politics, and there's a time for economics. Just not when you're trading the day timeframe.

Good point mentioned by Dr. Brett. The trader should understand that the short term market movements has nothing to do with market fundamentals.

Good example? Look at our stock market!! :p

But what then should the investor do now?

LOL!

The March rally has made so many market experts. Try asking them. :p

Can I Make It In The Stock Market As A Trader?

Are you a trader who has not much success in the stock market?

Have you bought and read tons of books and yet cannot find any success?

Here's a recommended reading article by Dr. Brett. Can I Trade for a Living? The Quest for Trading Success (do read in full and not only the following highlighted passage)

• The missing element? Skill development. Training. A systematic program of learning that emphasizes pattern recognition, an understanding of market movement across time frames, intermarket relationships, sound execution of trade ideas, and risk management.
  
  Mindset is critical in sustaining motivation, interest, and focus during the learning curve, and mindset is crucial in the consistent application of one's skills. The wrong frame of mind and emotional/cognitive/physical state can disrupt the best of skills, but the best of mental outlooks cannot substitute for developed skills. No positive mindframe and "method that suited me" can provide competencies--in any performance field.

Know What You Are

I like the following quote mentioned by blogger Kirk in his daily link fest.

• You have to know what you are, and not try to be what you’re not. If you are a day trader, day trade. If you are an investor, then be an investor. It’s like a comedian who gets up on stage and starts singing. What’s he singing for? He’s a comedian. Steven A. Cohen

To Be Correct!

Here's one fantastic blog posting from Dr. Brett: The Need To Be Right Versus The Need To Make Money

• Over the last few days, I've had the opportunity to talk with everyday investors as well as my usual contacts with prop traders and portfolio managers. One of the distinguishing themes in these talks has been stubbornness versus flexibility: the willingness and ability to maneuver and adapt to changing market conditions versus the need to stick with positions and be proven correct.
  
  Among the traders, the ones who have done well in the recent market decline are those who have been selective in their risk exposure, riding short-term market moves, limiting overnight headline risk, and shifting positions tactically to adjust to volatile conditions. They have focused on making money--and limiting loss of capital. They've been quick to recognize when they're wrong, at times getting stopped out once, twice, three times before finally riding the anticipated market move.
  
  The traders who have performed most poorly are those that have been stubborn. They have had strong views of markets and have stuck with those views, even in the face of markets that have moved against them. Convinced that markets are overdue for reversal, they have faced large losses as weakness has led to further weakness. They have been more concerned about being right than making money; they've been reluctant to be stopped out, instead waiting for markets to validate their opinions.
  
  Interestingly, I'm seeing the same dynamics among individual investors. Some have made proactive adjustments to their portfolios to reduce risk, including reducing exposure to vulnerable investments (financial stocks, preferred shares, high yield bonds); some are also revising their views of the financial future, looking for themes and sectors that will benefit in a changed economic environment (firms that generate cash and are less reliant on borrowing; firms that appeal to consumer value rather than luxury; safe yields among beaten down bonds). Other investors are frozen, immersed in hope that "things will come back". They remind me of the dot-com investors who, stunned by losses of 50% in their holdings, insisted that a bottom was at hand. Sadly, many of these shares declined by more than 75% before we saw a durable market bottom--and many of those companies never survived the decline.
  
  This is one of the paradoxes of trading and investing: you need distinct views to put your money at risk, and you need to persist with these views in order to ride winners. At the same time, you can't become married to these views; you need to quickly revise and even abandon your outlooks in order to limit losses. We can trade and invest for ego needs, and we can trade and invest to make money: over the long haul, we can't do both. It takes a strong ego to formulate and act upon one's ideas; an even stronger one to step back from those ideas in the face of non-confirmation.

To be correct.. !!!!

Yes, isn't this what we are seeing in most investors?

The clear and precise changes in the business economics could been seen for so long already.

Yet many chose to be stubborn and delusional and they simply refused to accept the changes. Instead they held on strongly to the believe of long term investing.

Now do not get me wrong, I am a staunch believer of long term investing too. There is absolutely nothing wrong with the investing theories. However, has one questioned about the application of the theory itself? For example, I am realistic about the LIMITATIONS in our market and I am also aware of the lack of the long term COMPETITIVE ADVANTAGE for most of our local business itself and I am also aware of the rather STRONGER CYCLICAL nature of our local business earnings.

How?

Just buy and hold, in regardless?

I would if the company we are talking about is if the same exact quality as a Coke!

And for sure, there is always a strong chance that tomorrow will always be a better day. Crisis like boom times, they come and they go. One day, the present crisis WILL pass us by and it's simply paramount that we are there to profit from it!

Oh yeah the truth does hurt so bad, doesn't it?

To Continue To Err Is The Greatest Mistake!

Great post by Dr. Brett!

To err is human; to continue to err is the greatest mistake traders make.

Any individual trade can make money or lose money. If you're in a drawdown mode over time, however, at least one of the following problems is present:

1) You're Off Your Game - Not trading well, taking bad trades, failing to take good ones, not managing money and risk well.

2) You're Wrong - You're trading well (i.e., following rules and good trading practices), but you've just misread the market.

Either way, you need to recalibrate. First you need to answer the question, "Is it me, or is it the market?" Then you need to figure out how to get back on your game or you need to reassess the markets and find opportunity.

To recalibrate, it is necessary to step back from trading. The greatest mistake traders make is not making mistakes--we're all fallible, and we're all going to lose money at various points in time. No, the greatest mistake is to *continue* making mistakes.

When we don't step back from trading and recalibrate, we take the magic of compounding and turn it against ourselves.

Some of the best active traders I know routinely take a midday break and review their morning trading. They generate charts of their day's P/L, review markets, and basically start their day fresh whether they're up money or down. Very often they'll use that break to set a goal for the afternoon that corrects any problem they noticed in the morning.

The same idea applies to trading at the end of a day. Reviewing how markets behaved and how you performed--along the lines of the performance idea I linked yesterday--provides you with a sense of how well you're understanding markets and how well you're capitalizing on that understanding.

Professional football and basketball teams know that they need to take a time out when the game isn't going their way. It's a chance to regroup, alter strategy, correct mistakes, and just catch a breath. Similarly, we take the first step toward changing performance by interrupting our performing and entering into a reflective mode.

We set the stage for some of our best trading once we've stopped trading. It's not enough to think about markets. We also have to think about our thinking.

Source: http://traderfeed.blogspot.com/2008/02/greatest-mistake-traders-make.html

----------------

Comments:

Yeah... in regardless whether one is trading or investing, making that same mistake over and over again all the time... now that's really sickening, isn't it? And if ever I do such stuff... it will makes me feel like a darn retarded cow, making the same old silly mistakes over and over again!

Don't you agree?

I Believe I Can Fly

It takes a man a long time to learn all the lessons of all his mistakes. They say there are two sides to everything. But there is only one side to the stock market; and it is not the bull side or the bear side, but the right side.

With me I must back my opinions with my money. My losses have taught me that I must not begin to advance until I am sure i shall not have to retreat. But if I cannot advance I do not move at all. i do not mean by this that a man should limit his losses when he is wrong. He should. But that should not bread indecision. All my life i have made mistakes, but in losing money i have gained experience and accumulated a lot of valuable don'ts. I have been flat broke several times, but my loss has never been a total loss. Otherwise, I wouldn't be here now. I always knew i would have another chance and that I would not make the same mistake a second time.

I believed in myself.

- - passage from Reminiscences of a Stock Operator --

-- Thanks MJ

How Now Brown Cow?

Here is a fantastic posting from Dr. Brett.

• Suppose you're contemplating a sailing trip. The weather forecast suggests only 10% chance of a thunderstorm, so you decide to set sail.
  
  As you get out onto the ocean, you notice a few raindrops. Then you notice the sky darkening. The air pressure begins to fall rapidly.
  
  What do you do: continue your voyage or pull into port?
  
  When traders examine the historical record for what markets have done under particular conditions, they come up with their own weather forecasts for the market. When conditions have been bullish, the forecasts after market declines are apt to be bullish.
  
  But suppose you begin to venture into the market and notice fewer stocks making new highs. Then you observe more selling pressure than buying with respect to the NYSE TICK. You see the advance-decline line making new lows. You see continued signs of risk aversion among institutional traders.
  
  What do you do: continue buying the market or pull back?

Click here for the rest of the article: http://traderfeed.blogspot.com/2007/08/bit-of-perspective.html

And over at FSO, market commentator asks if Reality Setting In?

The Delima

My Dearest Moo Moo Cow,

Just received this piece of article in my mail-box. It's fantastic really.

• The Trader's Dilemma
  
  By Dale Baker
  
  February 20, 2007
  
  Whenever the markets slip a bit, we hear that buy-and-hold investing "never works."
  
  The short-term traders make two main arguments against fundamental analysis: 1) You can't rely on company-provided information, and 2) markets are just an amalgamation of buyers and sellers at a given oment in time, so all you can do is chase the nervous herd every day to make a profit.
  
  I think they're wrong on both counts.
  
  Knocking down the straw man
  
  The rise and fall of the dot-coms, plus the spectacular accounting frauds at Enron, Tyco (NYSE: TYC), HealthSouth (NYSE: HLS), WorldCom, etc., produced a new school of fundamental-analysis skeptics. Since a few companies were paper tigers or outright frauds, they argue, all companies run a risk of turning out the same.
  
  A freshman-level Logic 101 professor would knock down that straw man in a hurry. It's called a spurious correlation: "If some, then all" is not a viable hypothesis.
  
  If some people who get in an automobile are injured or killed, should I avoid all ground transportation? If an even smaller number who board an airplane are killed, should I avoid flying? If some prescription drugs have unknown side effects and adverse interactions, should I refuse to take all prescription drugs on principle?
  
  Of course not. If I avoided cars, planes, and prescription drugs, my life would be pretty limited. Investing is the same way.
  
  Who's the richest investor in America? Warren Buffett of the Berkshire Hathaway (NYSE: BRK-A) empire, of course. What philosophy does he follow?
  
  Value investing.
  
  How many superbillionaires made their fortunes in short-term trading? Not many. A few of the top hedge fund managers did, but not that many. Suffice it to say that they don't come close to Buffett on the 100 richest people in America list.
  
  The problems with excessive trading
  
  Trading sounds so easy in hindsight. One of the charting services has a commercial on CNBC that reminds me of a third-grade math class: "Look at this stock. It went up here, then it went down here. If you knew in advance where it was going, imagine the money you could make."
  
  Duh. And if I were the Prince of Wales' elder son, I would be the King of England one day. But I'm not. Only a very small, very select group of people ever become a monarch, just like only a few can untangle the mystery of technical analysis well enough to make a good living at it.
  
  traders face many more hurdles than investors.
  
  Diversified investors have to pick 20-40 stocks for a good-sized portfolio, decide when to buy, follow the news, and then decide when to sell. They can buy and hold for years if they like; Buffett often says he wouldn't mind if the arkets closed for a year or two.
  
  A trader, on the other hand, often makes more than 1,000 "round-trip" trades every year. That's more than 2,000 buy-and-sell decisions in several hundred stocks. The odds of making bad decisions go up exponentially with the number of decisions you have to make.
  
  Traders get smug when the market dips and they're sitting mostly in cash, but they go strangely silent in sustained runups where the 100% invested fundamentals guy makes his big returns for the year. A trader who goes to cash after every trade has to go out and find new trades each and every day to keep up with the investor. The fundamentals guy can wake up in the morning, decide his portfolio is fine, do nothing all day, and still beat the markets over time.
  
  The list of stocks that doubled, tripled, quadrupled or better since the market lows in 2003 goes on and on. It's a classic tortoise-and-hare story.
  
  The hare is flashy and full of energy, but he's also easily distracted and likely to burn out before the finish line.
  
  The fundamentals investor has to endure market setbacks and protracted periods of boring portfolio performance. Over time, however, the small number of well-informed decisions he makes should bring a superior return.
  
  The argument that a stock is only worth what the herd will pay for it right now comes from the efficient-market hypothesis. It says you can never do better than what the market offers right now, because the multitude of players know so much that all possible information is already priced in to the stock.
  
  Nonsense. If markets were efficient, I couldn't make a living. Even with rudimentary fundamental analysis knowledge, you can find undervalued stocks whose hidden sterling qualities have not been priced in yet. Otherwise, no stock or portfolio could ever beat the market indices. But every year, thousands of stocks do better, and at least several hundred fund managers do the same.
  
  So can you.