Most Financial Analysis is Crap

Like the news, most of what is passes for financial advice/analysis is just noise and should be ignored. This is no exception:

Comment: The small correction off the overbought high levels was expected and the question is whether it will develop into a short-term correction. The recent massive redemptions in hedge funds are alarming. Recall that those investors put their money in hedge funds to literally hedge against a possible decline in stocks. Recently they have gotten too greedy and they have pulled out the money and bought stocks. We know what that could possibly mean for the next few months. Unless Mr. Draghi is convincing with another verbal intervention, something that is getting less likely, we may want to guess where the market is heading to: the trade is now too crowded in the short-term.

Price Action Lab has a history of bad analysis. None of this shit means anything. Like the ongoing developments with Putin and Russia, no one outside of the echo chamber of the media cares that much about Draghi the drag queen. Whatever he does will not have a long-term impact on stocks, but odds favor more intervention because that is what has happened in the past and there is no reason to expect a change.

Hedge fund inflow/outflows are of no predictive value. Hedge fund withdrawals were high in 2009 and that was the market bottom, so one could argue that withdraws are a bullish indicator. Maybe more people are waking up to the the lousy returns provided by most hedge funds and their inability to actually hedge large declines. Even when a hedge fund does hedge, it’s no guarantee you will make money. A hedge fund that falls less than the market on the way down will almost always rise at a slower rate than the market on the way up, providing no final benefit over an index fund. You may as well just put your money in 3-5 year treasuries than fritter it away in management fees just so you can say you ‘only’ lost 30% of your money in a crash instead of 50%.

The golden rule is whatever narrative the doom and gloom liberal media cooks up for why stocks should go lower, 99% of the time they will be wrong. It can be wealth inequality, home prices going up too much, not enough ‘good paying’ jobs being created, oil, youth unemployment in Spain, pain at the pump, student loan debt, Putin, China, auto debt…the list goes on and on.

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