[Scorpion Man]

On technical analysis, I will use a term I just learned at 2+2 = "MEH". I don't find it useful in the way its generally used. I am sure TONS of people will disagree and I don't even care to argue the point...there is more than one way to skin the cat in the stock market. That said, there are a few "patterns" that, when married with what was actually going on at the company, were definitely worth looking for. As just one example, I would say the most prominent of these is a stock that has gone through a meaningful decline, has based for a significant period (at least 6 mos...but the longer the better and if its years that's terrific) and the FUNDAMENTALS OF THE BUSINESS ARE EXHIBITING A POSITIVE SECOND DERIVATIVE CHANGE. This is the best turnaround setup.

In general, however, I have no patience for the 200 day, 50 day, blah blah blah. I have not seen people make a lot of money using this stuff...it is also more of a trading strategy than an investing strategy. I don't want that statement to be too blanket though. Relative stregth, for example, is an important tool in understanding how a sector or stock is performing, etc. I am just not a big fan of drawing trendlines. I have seen them abused more often than a catholic schoolboy.

On the whole "large corporations" and "teams of analysts"...That is a frequent refrain I had heard for years. Its a long answer and people have to be oh so overtired of reading this stuff...but I will give it a brief shot. If by "large corp" you mean Goldman, Morgan, and all the sellside investment banks...hah! You ever watch Vince van Patten give poker analysis? very similar situation, except he is better looking. Life is about incentives...and the incentives (this is complicated because it has changed over time as the regulatory regime has changed) of these analysts to make money NEVER INCLUDED BEING RIGHT. It was simply unimportant to them getting rich. So, in addition to being very mediocre intellects (which most of them were when I was in the business, for the very reason that nobody the best people do not become associates for sell side analysts -- its a crap job -- and when their bosses leave, they get promoted.) their incentives, historically were
#1 bring in investment banking deals - this was done by kissing the aholes of the companies they covered
#2 become popular with "buysiders"; primarily mutual fund managers...this was mostly about getting good tickets to games, bringing tasty sandwiches to meetings and making sure that if a given management team were in town that you got the meeting. Also very much about returning calls quickly and at any hour of the day.
#3 Its a sales and marketing job. There is very little freaking research done by "research analysts". They are way too busy talking to people on Wall Street to stay popular to actually go out and do work so that when they are talking what they say means very much.
#4 The vast majority of sellsiders have 0% (historically at least...I can't speak to recent changes) of their compensation tied to being RIGHT. For chrissakes ... being right was like the last thing their employers cared about! Actually, being negative and right was MUCH worse than being positive and wrong...and I mean by an order of magnitude.


Soooooo.....sellside analysts are greedy, lame-o, intellectually mediocre, inexperienced shills...capiche?

This is too long, but for very many years hedge fund guys just worked much harder and cared much more and were much smarter than the mutual fund guys. There was a key reason for this...we kept 20% of the profits. The mutual fund guys mostly were trying to keep their jobs and usually got 0% of the profits. And the game keeps changing. When I started, it was pretty easy...you picked up the phone, called the CFO and asked "Are you guys gonna beat the quarter" (it was a little more artful than this, but let's this is not that far off). Today its tougher and people pay for access for all kind of exotic info. There was one large hedge fund that had a guy stationed in taiwan taking the plant managers to strip clubs and finding out how the wafer starts were for the chip business...its really that broad a swath of tactics.

Life is about incentives. People do what is in their own best interests (except for me, who for some reason is sitting here typing this).