Stocks, Forex and Other Money Matters

Despite Fisher’s extensive experience he rejected the idea that he could predict short-term price movements, and thereby benefit by selling a stock when it appeared to be too high with the expectation of buying it back again after a price correction.

There is: ’A risk to those who follow the practice of selling shares that still have unusual growth prospects simply because they have realized a good gain and the stock appears temporarily overpriced…. These investors seldom buy back the stock at higher prices when they are wrong and lose further gains of dramatic
proportions….I do not believe it possible to play the in and out game and still make the enormous profits that have accrued again and again to the truly long-term holder of the right stocks.’

Fisher was equally critical of those who relied on economic forecasts to time investments, which he regarded as ’silly.’ He likened the current state of our knowledge of economics (for forecasting future business trends) to the science of chemistry in the days of alchemy in the Middle Ages.

There are rare occasions when speculative enthusiasm pushes stocks to ridiculous extremes (such as 1929, 1987, 2000) when an economic analysis will predict what is likely to occur. However, such analysis would be useful only one year in ten.

Fisher said, ’The amount of mental effort the financial community puts into this constant attempt to guess the economic future from a random and probabily incomplete series of facts makes one wonder what might have been acomplished if only a fraction of such mental effort had been applied to something with a better chance of providing useful… (the) investor should ignore guesses on the coming trend of general business or the stock markets. Instead he should invest the appropriate funds as soon as a suitable buying opportunity arises.’

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