[Mark1808]

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David,

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But it is not moronic to say that the market is one of the best experts in telling you what a stock should BE.

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Can you please elaborate on this statement of yours? In what sense does a current stock price tell you what the stock price "should be"? And what exactly do you mean here by "should be"? Obviously if the price is $4 today, then it is more probable that tomorrow (without any other knowledge) it will be somewhere in the range between $3.5 and $4 than in the range between $3 and $3.5, for instance, but this is a rather trivial point I think.

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I agree. I'm not really sure what David is trying to say. We aren't graded by our ability to accurately estimate future prices, but by our ability to make decisions that are profitable. Factoring in *current* prices, as long as it's done by a constant factor, should never materially alter one's decision to buy or sell, unless bid-ask spreads are extremely high.

What he's saying essentially is that the market price is a pretty good unbiased estimator of future prices. I don't disagree, but there's no real significance in terms of beating the market, except when you're dealing with derivatives. You don't make money by agreeing with the market.

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If the market correctly prices securities their can be no abnormal profits from research. Only when incorrect pricing occurs are abnormal profits possible. If a mis pricing is suspected by an analyst he ought to do a double take because the market is fairly effecient in pricing securities and the error is more likely to belong to the analyst then if for instance he differed in his valuation assesment from someone less competent, me for instance.