In stock markets there are three main types of estimates of the future:

A. The Naive

This forecast is based on linear trend extrapolations.

B. The Gullible

This forecast is based on analysts estimates, and

C. The Expert

This prediction is based on rigorous systematic study.

Forecasts, predictions, prophesies, expectations and anticipations concern the future. Man has always had an inordinate desire to know the future, and this is exploited just as fully as any other human passion.

Aristotle (384 - 322 BC) in his "Rhetoric" made a distinction between hortatory statements about the future and expository statements about the present time.

John Maynard N.Keynes (1883 - 1946) in his "Scope and Method" originated the use of the term "positive" to refer to "what is" and the term "normative" to refer to "what should be."

These terms make the distinction between facts about the present, on one hand and opinions about either the speculative future or an ideal state on the other hand, respectively.

The important point here is that statements about future earnings and growth rates are normative, not positive.

They are opinions, not facts!

No one's "crystal ball" is any more reliable than any one else's! Therefore, if not self-reliant, then one must rely on the expert opinion of others who have different agendas and conflicting interests.

Similarly, statements about efficient and rational markets where all prices instantly converge to intrinsic value are normative, not positive.

They are not reality, but rather utopian ideals approached by stock markets as complex aggregates but not by individual stocks.

Perfectly efficient markets are necessary as a fixed standard for comparison, and thus serve a useful methodological function.

Haramis - Stock Brokers - Athens, Greece

Betting on information from people who supposedly have the inside story on a company is extremely dangerous!

Everyone has an opinion and chances are they do not have all the facts. In my experience, trading on tips from these "reliable" sources have always given me the same results:

I lose money!

There is also "Your Brother-In-Law" theory, not highly recommended by anyone ... but followed all too often by many investors!

Your brother-in-law, or "some guy at work," tells you about a stock that is "really going to make you a lot of money." You know nothing about the stock but you rush out and buy a hundred shares nevertheless.

I think the right word for this group is "losers."

Would you buy a stock because an "expert" on TV or a paper says it is a great investment?

Chances are, they or their company own too much of this stock and need to get rid of it.

It is called "Pump and Dump."

Pump up how great the stock is, then dump it when unwitting investors buy it because they think it is a great investment and it is really not.

I am not saying that every "great" stock that is mentioned on TV or in the papers is actually a dud; sometimes they really are high flyers, but I would not put money on them just because some "expert" recommended them!

Would you invest in a stock because of a friend's tip?

It depends ...

But before you decide, check out what he "really" knows about it, and do a thorough research of your own!

Parrot - Stockbroker

Would you place your trust and invest your hard earned money on rumors and street talk?

No!

While we do actually say "buy the rumor" and "sell the fact," on the other hand, how many times didn't the rumor just remained a worthless rumor?

Always try to get unbiased opinion. Ask yourself about the motive behind the "tip." This might save you from a lot of trouble. Besides, you don't need the "tip!"

All it takes to "beat the market" is commonsense thinking, plain good old time dealing and ...

Patience!

On Monday, October 19, 1987, the Dow Jones Industrial Average declined 22.6% in the largest single-day drop in history.

This one day decline was not confined to the United States, but mirrored all over the world. By the end of October, Australia had fallen 41.8%, Canada 22.5%, Hong Kong 45.8%, and the United Kingdom 26.4%.

Black Monday, as it has become known, was almost twice as bad as the stock market crash of October 29, 1929. The 1929 decline approximated 11.7% and started the Great Depression.

The Securities Exchange Commission, academic professors, financial writers and every financial security firm has analyzed the stock market crash of 1987 in about every way possible.

Some believe the market crash was caused by an irrational behavior on the part of investors. Some analysts believe that excessive stock prices and computerized trading were the cause.

The key finding is that no single news event occurred that could account for the crash!

The stock market was doing quite well for the first nine months of 1987. It was up more than 30%, reaching unprecedented heights. That was after two consecutive years of gains exceeding 20%.

By 1987, interest rates began to climb. Three days before Black Monday, the stock market gains for the year dropped by 11.6%, including the effects of a 9.5% drop on October 16, 1987.

The three day drop was caused by several macroeconomic factors. Long-term bond yields that has started 1987 at 7.6% climbed to approximately 10%. This offered a lucrative alternative to stocks for investors looking for yield.

The merchandise trade deficit soared and the value of the U.S. dollar began to decline. After a speech by Treasury Secretary Jim Baker, investors began to fear that the weak US dollar would cause further inflation.

On Monday, the Dow dropped about 200 points or 9% in the first hour and half. During the day, most institutional investors implemented various computer-based portfolio insurance programs.

Portfolio insurance was destabilizing because it required selling stock as prices declined. The more stocks fell, the more stocks were sold. As the market did not have the liquidity to support the sales, the stock market fell even further.

Buyers waited, knowing the more the market dropped, the more selling would have to take place. By the end of the day, the Dow had lost 508 points.

One important lesson came out of this 1987 stock market crash:

Investors who sold, were taken to the cleaners. Those who held and continued a disciplined and systemic approach received rewards!

In fact, by the end of 1987, total return for the year, including dividends, approximated 5%.

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Buy the Dips!

"The best time to buy stock is when blood is running in the streets."

Nathan Mayer Rothschild (1776 - 1836)

I hope that you have enough courage to enjoy the market's severe ups and downs!

But for most of you these are unsettling times, and you start sweating when you see your holdings decline by double-digit percentages!

But take courage, those movements may actually be good for you!

What should a careful investor do in a market downturn?

How can you avoid panic and make the best use of panic selling by others?

Dramatic dives in the stock market allow you to "Buy the Dips!" And the dips are so frequent these days, you don't even need to know when they will occur!

With stock prices flying up and down, chances are that on your next payday prices will be down, so you'll get more shares for your money.

You'll be enjoying cost averaging!

The more volatile the market and the more extreme the price fluctuations, the better off you'll be in the long run.

It may sound crazy at first, but it makes sense:

When prices swing wildly up and down, you will frequently have the opportunity to buy low.

As the stock market inches up over time, you'll enjoy greater gains than those who plunked all their money into the market when it was high, or who invested in a market that was slowly rising rather than wildly fluctuating!

So when prices dip, open up the champagne ...

You'll be buying stocks on sale!

"The market is a place set apart where men may deceive each other!"

Diogenes Laertius (Circa 200)

How many ways are there to be cheated?

Shall I count the ways? Well ...

No one can!

There can be as many ways to cheat investors as there are swindlers, con artists, and unscrupulous brokers and ...

There are quite a few of those out there!

When you invest your hard earned money with a stockbroker, you do so with a level of trust, and this trust is backed up with strong legal protections to protect your interests. Nevertheless, investment and broker fraud is all too common.

Brokers take advantage of the fact that they are entrusted with large sums of money and sometimes can create scams to defraud the investors.

If you have experienced large losses to your account, sometimes the responsibility may lay with your broker.

Securities litigation is a very complex and specialized area of the law. If you feel your rights have been violated, your best recourse is to seek an experienced professional to assist you.

Have you been the victim of bad investment advice?

Did your stockbroker recommend risky investments without explaining the risks?

Did your stockbroker make trades without your understanding or authorization?

Did your stockbroker excessively trade your account?

Securities investing and trading is carefully regulated by rules and laws for the protection of public investors. The violation of these rules, particularly through various deceptive actions and schemes to cheat or take advantage of investors, is commonly known as securities fraud.

If you believe that you may have been a victim of securities fraud, you have certain rights, which you should be aware of, rights which may provide you an opportunity to recover your losses from your stockbroker or brokerage firm.

Haramis Stock Brokers - Athens, Greece - Protect Yourself!

Most investors who have been defrauded do not know what happened to their investments until it is too late.

But even after the losses have occurred, the law provides mechanisms for investors to recover their losses, which were caused by a stockbroker's misrepresentations or abuse of the account.

Stock brokers and brokerage firms have certain obligations and duties to their customers. And investors have a right of recourse if their account has been abused or if they have been defrauded by an investment advisor.

An investor who believes that he or she may have been the victim of an unscrupulous stockbroker should consult with an attorney to learn more about their rights under the circumstances.

Most investment advisors and stock brokers are honest, decent individuals who follow the rules of the securities industry and provide a valuable service to the public.

Unfortunately there are some unethical and dishonest investment advisors, and there are some brokerage firms that do not supervise their brokers and accounts as carefully as they are required.

Hopefully, a better informed investor will be better able to protect himself, evaluate what has happened in an account, and have some idea what might be done about it!

All investors should be aware of their rights in order to better protect themselves and to have a higher level of awareness of the standards to be expected in an investment relationship.

Many stock brokers' and customers' disputes might be avoided by better informed investors going into their relationships with their eyes open and knowing their rights!

It is this time of the year ...

The time of the earnings season again.

The part of each yearly quarter where investors always believe that it doesn't really matter whether a company does well or bad!

It is this time of the year that the only thing that really counts is whether a company did better or worse than actually expected or "forecasted."

In plain words, it is fine for a company to get heavy losses, as long as the extent of the predicted, forecasted or expected decline is at least a little less than the analysts had been expecting.

At the same time, a company that does really well deserves to be hardly punished -- punishment = declining stock price -- if its ascent is even marginally slower than what analysts had actually been expecting!

If this sounds stupid to you ...

It does definitely mean that you 100% get it!

IT IS 100% STUPID!

Measuring actual performance against expectations is OK within the context of a feedback process -- a normal and healthy aspect of intellectual activity, which ...

Is NOT OK when it becomes a real psychosis!