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Silver Wheaton Corp. Message Board

  • chemaes44 chemaes44 Jan 3, 2009 3:33 PM Flag

    Fundamentals v technicals-Off topic

    For anyone who does not understand the debate, let me prep you. This argument is about quantitative (by the numbers, science) analysis vs qualitative (your feeling based on something..) analysis.

    Fundamentalists believe you can look at the information a corporation has provided about forward sales, their operations, management decisions then make projections on EPS, multiples etc to make an educated guess on whether to buy, hold or sell shares. Pros: It does give you a basis upon which to start your decision making processes. Cons: It can not be relied upon solely. I have worked in quite a few publically traded companies near the top, and they never, never reveal all the information. They can't or else share price suffers in conflict with the CEO's basic job description to promote shareholder value. Insiders always act on the information held from the public, whether the CEO, COO, CFO, all C-levels, have their accounts in some distant cousins name, distant aunt, half brother or what have you, they always act on the information before hand and this can be seen in charts. Think about how until the very end CEO's, instead of telling the truth, lied and lied at Enron, Worldcom, Arthur Anderson, Merryl Lynch, Bear Stearns etc. etc. The thought you can rely on fundamentals alone is flawed because the information you are receiving is always flawed, incomplete, spun, sugar coated, and nontransparaent inspite of sarbanes oxley or any other transparency rules.

    Technical analysis uses as the name implies mechancial, process oriented quantitative reasoning to access whether you buy hold or sell shares. Some would have you believe its all about the hocus pocus of looking at charts. It is so much more than that. It utilizes actual KPI to access how money is flowing in or out, whether momentum has changed in or out, what are the key high and low price levels, what are the key market makers and specialists doing, what are the key market makers and specialists who hold the executives shares doing, why is the volume moving when there is no news etc. etc.

    In the end the two should not be considered exclusive if one another, they should be used in tandem to make the most practical and best decision possible. I call myself a Fundatechnicalist, and it is not because I wish to sit on the fence, its because the more information the better!

    I tried this debate once two years ago, and its as pointless as arguing religion or politics, but H.e.l.l. I'm bored today.

    let's have at it then

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    • PRAY for those in danger? You think your god roots for one side or another like some global football game with human life as points?

      Voodoo isn't going to keep shrapnel from perferating your colon but good cover will, or, here's a thought, moving out of the country or area where the fracas is.

      I hope they bomb the crap out of each other--why would I care? There's a couple websites that aren't friendly to folks in the Middle East for example, but list year by year the fracas and bombings and disruption by one community against another for whatever reason. It fills volumes.

      This is why you whine into an empty sky on Sunday, to gather strength to screw your neighbors Monday to Saturday?

      Trust no one. Otherwise someone will Madoff with your money and your ability to feed yourself.

    • I don't pay much attention to either of these methods. I think it's most important to identify the hot sector. Once that's identified, then we'll have exuberant emotions taking over the stock prices, and then none of the fundamentals or technicals will mean much.

      Fundamentals and technicals are for the people who love science. For those who thinks the science can explain everything.

      I am a humanist. I don't think it's that hard to grasp the basic concept of the charts and all, but it hard to grasp your own emotions as well as others. If I can overcome my own emotional weaknesses when trading, I would be so much more successful then if I just manage the data and the science. Recently I begin to pay more attention to the emotion of others, meaning taking news more seriously and thinking the big picture in relation to my stock picks more so than ever before.

      And of course, in this day and age, there will always be people who love to quantify things and make human emotions a science as "behavioral science." I for one will always detest people who think they can master the world with science.

      • 2 Replies to shenjee
      • I concur with you and Chemaes, which is why I try to guage the range for the day and play inside without a lot of squiggles and guages other than volume, and upticks and down.

        I see the stock near the bottom of its day range, and the upticks are five to six strong when that happens, I'm liable to buy and wait for the those five or six upticks to carry me forward five to seven pennies. If the market is strong and silver up a percent, I will hang for another seven or eight pennies. If I think I bought the low with my first bit of stash, and it goes lower to test the first low of the day, I double down.

        No calculators required, I make a few pennies here and there more often than not.

        If silver is up, there is no news and SLW is down, which happens, I know that is aberration and I am liable to go all in at that point.

        I don't short, shorting makes me crazy and appears counterintuitive that I cannot guage it correctly.

      • Shenjee, you are bang on about emotions. It is the number one thing you have to overcome when trading. Emotional traders will not last.

        But when you say >>meaning taking news more seriously<<<

        therein lies the rub, to borrow from shakespeare.

        There is a saying: "buy on rumour sell on news" and it is ever so accurate. If you are reacting on news, you are reacting too late. More times than not when news is released a stock price will tank.

        The yahoo board is something that I utilize to gauge emotion, but I also use fundamentals, and also use technicals. The thing is, use as much information as possibly available to make the most informed decision.

        I am techincally inclined, and where once as a young man I thought there was a formula for everything, I now know as I've gotten older, that there is so much more that I don't know and will never have a formula for.

        In the end, if your method brings you success over many years, then the discussion is a moot point. However if your method doesn't bring you success, then hopefully you'll remember a little chat you had on a message board, way back when, that left you with: the more information the better.

        Good trading
        Chemaes

    • My two cents is, fundamentals tell you which way the sea is flowing, technicals may tell you the height and depth of the waves on a particular day.

      In the absence of news, the fact is silver has already put in a bottom in the mid to high nines, and probably doesn't deserve much premium as an industrial play, except by some anticipatory dreamers who are about a year ahead of that power curve. As to a currency play, there is always the trillions printed globally, as reflation is the policy.

      But on a day where the stock flucuates 75 cents on no news whatsoever, fundamentals don't tell any part of that swing trade story. You don't have to be a genius to wait for 1030 or so, see where the high and low are, and take a position at within ten cents of the low with one third your stash, and wait to double down if it goes lower.

      Had you done that Friday and dumped near end of day, you'd have had a nice run on thin volume.

      Next weeks bad news on the economy meant getting out on Friday is the right answer for all those who aren't betting the family jewels on the inauguration pop full bore. For those who are, moseltov.

      It is at this point, I thank my stars I've got covered calls out against this stock and cand will ride the waves hup and dune, fore and aft.

      I can buy them back, or use the proceeds to buy more shares on downticks and trade with other people's money.

      That's a hoot.

      And by the way--I don't mind technicals, but in an environment where a stock can only go up down or sideways, the prediction its going up or down is betting two rows of 24 numbers on the roulette board that contains 38--I mean, how much guidanc is that when the shares vascillate 50-75 cents per day anyway.

      IMHO

    • Chemaes makes strong truthful points in his entire posting. Paragraph 2 is so real. Look at the chart for Friday, just after 11:30 notice the line up at 6.85/6.86 and then the decline to 6.60. What do you think happened at that time and for several minutes before that... What happened was that the market makers-specialists had some direct orders placed. These orders were not placed in the extended order books. But one could see a decline coming minutes before. They traded among themselves to adjust for these orders. Who wanted to sell, how much and why... Was it hedge funds, someone with strong knowledge or just a holder. For sure it was not hedge funds. Silver prices were stable and no breaking news. This had happened several times in the last trading days.

    • Excellent post, chemaes.

      Had been a disbeliever in technicals until about 5/6 yrs ago when I chose to take a course in investing...and was astounded at improvement in risk/reward utilizing technicals with sound stocks.

      I follow your posts. Now study markets as tho I were going toward post-doc work from the Kindergarten level, and appreciate IMMENSELY the posts of all who are knowledgeable.

      Yes, I read, study, research. Constantly, when I'm able...but I have other hefty obligations at this time.

      Personal interests/expertise more in areas of research/academics than anything involving business/markets. I'm a fish outta da water,

      but entirely fascinated by markets/cycles...which actually DO coincide to a great extent with natural and repetitive cycles/physics/math/statistics/psychology...

      Very best to ya' ~

      PS: I pose as CyberRoseAnneRoseAnnaDana from time to time...partly to relieve the tedium of heavy-duty chart-inspecting and market watching. Not unusual for me to spend 14/16 or more hrs/day when I'm able to do so.

    • Great post chem. I hold the same beliefs. I tend to favor fundamentals 60% and technicals 40%.

    • Agree. Nice post. Here is how I view it (having been in the market actively since about 1978-79). The NUMBER ONE propulsion system for a stock [whether one is a fundamentalist or a technician..or a mix of both] is
      1) earnings. Number two would probably be 2) earnings growth, over time. Outside of that, the number of variables can dizzy even the most ardent hard core "risk taker". With precious metals, one gets into the domain of fear, uncertainty, and doubt more than most stocks, which adds to the complexity of analyzing them. However, my bet: over the next year or 2, anybody who buys into gold, silver, or platinum will be highly rewarded ESPECIALLY if he buys into companies that employ a PROFITABLE business model (i.e. SLW being an excellent example). Cheers.

    • Chemaes, good post, in fact It is probably the best post in the last week or a lot longer. I will comment more myself, later this weekend.

 
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