Investing Truthiness
I must thank Stephen Colbert (whose show I watch nightly) for coining the term “truthiness”. Wikipedia (besides having entries about elephants) also has an extensive section on the origin of “truthiness”. The expression is a reference to the quality by which a person claims to know something intuitively, instinctively, or “from the gut” without regard to evidence, logic, intellectual examination, or actual facts. The most famous proponent of this trait is the American president George W. Bush. Though Ann Coulter is closing in from second place in my opinion. (Don’t worry, there are far too many examples to support this assertion!)
But is truthiness prevelant with investors? I looked into my gut and saw the truth. Actually, I didn’t have to know from my gut. All I had to do is visit the many investment forums to see truthiness in all its glory. Some famous ones that come to mind are Yahoo Finance, StockHouse, TheStreet. Notice that I left out Motley Fool’s board. The jury’s still out on that!
This is one of the main reasons that I absolutely stay away from investment forums and boards. I’ll disclose that I’m a member of one forum - InvestorGeeks. It’s not just because I’m on the InvestorGeeks writing roster. The purpose of that forum is to attract people who are not afraid to discuss and share valuation and evaluation techniques. There is a quest to search for the facts.
Investment blogs are also slowly becoming investment forums 2.0. I’ll pick on a recent article I read and commented. AOL’s BloggingStocks have not seen kind words from me in the past. But I’ll be the first to admit that Sheldon Liber’s recent posts have been of much better quality! However, the recent post from Brian White updating his view of the Microsoft share tender offer left much to be desired.
I have no quarrels with Brian reporting on the tender offer’s progress. But his opinion on the last few sentences is a prime example of investing truthiness:
[...] Being a MSFT shareholder, I opted to not sell back with the valuation of anything under $35 per share. [...]
Where did the $35 come from? The last 4 years have not seen Microsoft stock price go past $30 (split-adjusted). Blurting out a figure like this without any mention of how the valuation seemed fair is only irresponsibly hyping the stock.
The comments fared no better. No one who commented made any mention of a reason, or a valuation basis. Those assertions seem like shots in the dark, or perhaps a gut-check? I couldn’t find a better example of investing truthiness.
Those are some of the reasons why I’m happy and proud to be a value investor, who’s focused on assessing a company’s fundamentals. In case you were wondering, I do own Microsoft stock. More often than not, I ignore such “noise” and based my decisions on what my data tells me. Investing truthiness is not in my repetoire. What about you? How much do you practice investing truthiness? Is technical analysis a form of investing truthiness?
This post may end up being controversial. But I hope that some readers out there will start looking at guys like Jim Cramer and the entire CNBC network, ROBTv shows and realize that there’s just as much truthiness out there in the investing world as there are on CNN, and Fox news!
And that’s the word!
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- Are You An Investor Geek? (or The Next Motley Fools?)
