STREET DOGS

In his book The Guru Investor, John Reese writes: “Every day on Wall Street, something happens that makes people think they should invest more money in the stock market or, conversely, makes them pull money out of the market. Earnings reports, analysts’ rating changes, last month’s retail sales report – all of these things can send the market into a sudden surge or precipitous decline. The reason: people view each of these items as a harbinger of what is to come.

“On the surface, it may even sound reasonable to try to weigh each of these factors when considering which way the market will go,” says Reese, “but when we look deeper, this line of thinking has a couple of major problems. For one thing, it discounts the incredible complexity of the stock market. There are so many other factors that go into the market’s day-to-day machinations ... inflation readings, consumer spending reports, economic growth figures, fuel prices, recommendations of well-known pundits, news about a company’s new products, the decision of institutions to buy and sell – all of which and much, much more can impact how stocks move from day to day, or even hour to hour or minute to minute. One stock can even move simply because another in its industry reports its quarterly earnings.

“What’s more, the market doesn’t just move on raw data but quite often on how that data compares with what had been projected.

“Finally, let’s throw one more monkey wrench into the equation: the fact that good economic news doesn’t always portend stock gains, just as bad economic news doesn’t always precede stock market declines … [consequently] predicting which way the stock market will go is just about impossible, despite the selfassured claims of the ‘experts’ that we find on TV, the internet and in print.”