Positive Bias on Wall street

February 16, 2010

Wall street is a place where people are very biased for their own profits. One angle this can be analysed is when the analysts give out reports, why are there almost always more positive analyst reports than negative ones.
The negative reports target the investors which own the stock. So that is a limited market composed of only the people who own the stock, because they are the only ones who’ll actively be seeking such information( Umm maybe short sellers too, although small in number), while when we see that the greater number of positive analyst reports suggest that there is a bigger market there, which targets people who own the stock as well as people who are considering buying the stock.
So more coverage, and creating a small positive bias for all the investors to buy the stock, one of the factors, maybe a very delicate one, but I guess would affect the direction of the market in general.


Speculation vs Investing

February 10, 2010

I was reading “Margin of Safety” one of the very coveted books which is written by Klarman. He suggests that most investors find consensus with the crowd, one fool buys at a price without analyzing the fundamentals and he is looking for another fool to pay even more . I do agree that this benefits the value investor in the way that it creates opportunities when the market starts falling , and Mr. Market ( term coined by Benjamin Graham) starts selling good businesses on a firesale. This might sound like old advice wrapped in a new cover. But  I still think human nature is still the same, We still find comfort in consensus and in investing, act on a feeling(What goes down has to come up) rather than the numbers. Although some short term opportunities do exists due to this behavior by most of the stock market. I believe, The smartest people are the ones who take the dough.