Request for Insight
I spoke before a group of fundamental-based analysts and money managers at a major investment bank recently. While almost entirely fundamentally driven in their daily actions, this group was eager to see into the “trend following mindset”. As Wall Street moves forward and continues to distance itself from the dot-com bubble, those willing to entertain new ideas and questions old assumptions will br the winners.
From my perspective there are many problems with fundamental analysis. Edwards and Magee argue the cons to such analysis:
“Of course the statistics, which the fundamentalists study, play a part in the supply-demand equation - that is freely admitted. But there are many other factors affecting it. The market price reflects not only the differing value opinions of many orthodox security appraisers but also all the hopes and fears and guesses and moods, rational and irrational, of hundreds of potential buyers and sellers, as well as their needs and their resources - in total, factors which defy analysis and for which no statistics are obtainable, but which are nevertheless all synthesized, weighed and finally expressed in the one precise figure at which a buyer and a seller get together and make a deal
