16 Meaningless Market Phrases – #16

September 19, 2011 By Leave a Comment

“It’s a show-me stock”

General: A classic way to describe a company that has blown it.

When to use it: Any time you don’t know what a banged-up stock will do next–especially if you’re worried that viewers might think you were dumb enough to have owned it when it cratered.

Why it’s smart-sounding: It sounds tough, decisive, and judgmental. You’re not going to take management’s word for anything–not like those other idiots who just got blown up in the stock. You want to see the results. You want to make management show you that they can deliver, before you entrust them with your clients’ hard-earned money.

Why it’s meaningless: All stocks are “show me” stocks. If management “shows you” that they have delivered results that beat the market’s expectations, the stock usually goes up. If management “shows you” that they have blown the quarter, the stock tanks. Even when applied to the limited realm of companies that have just choked, if management “shows you” that they can deliver, they’ll show everyone else, too. The stock will go up before you can buy it.  And then, once the stock goes up, management will have to “show you” that they can continue to do better. And so on. By the time you and everyone else finally trust management enough again to buy into their vision of the future, the stock will have soared–and it will then be time for management to show you that they’ve blown it again.

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16 Meaningless Market Phrases – #15

September 12, 2011 By Leave a Comment

“Take a wait-and-see approach”

General: A perennial favorite.

When to use it: Any time you don’t have the balls to make any predictions or recommendations whatsoever.

Why it’s smart-sounding: It sounds prudent and cautious. It sounds appropriately skeptical. It plays to the viewer’s sense that, somehow, things are more uncertain now than they usually are. (Absurd–the future is always uncertain.) It sounds like there’s a specific event or events that you’re waiting for that will suddenly turn you into the Donald Trump of Conviction, instead of suggesting that you’re just perpetually wishy-washy. But it doesn’t actually specify what this event or events are.

Why it’s meaningless: It means nothing. How long are you going to wait? What are you waiting for? Why, when what you’re waiting for finally arrives, won’t everyone else see it at the same time and bid prices up or down? Why will the future be any less uncertain tomorrow, or next week, or next year, or whenever it is you’re planning to “wait-and-see” until? What are you waiting for?

 

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16 Meaningless Market Phrases – #14

September 6, 2011 By Leave a Comment

“Sell on strength.”

General: The corollary to “buy on weakness.”

When to use it: Any time you don’t actually have the balls to say “sell” but want to be able to say later that you told everyone to sell if the stock goes down.

Why it’s smart-sounding: It sounds highly informed. It sounds prudent (don’t be stupid and sell the stock here, when it’s already down).  It will allow you to take credit for predicting any downward move in the stock, while also being able to say “I said sell on strength” if it soars. It hedges all future outcomes, at least over the near term–by implying that the stock will eventually trade higher than it is today, and lower.

Why it’s meaningless: It’s too vague to be interesting or helpful. It can be applied to almost any stock or market at almost any time. It reveals that the speaker has little or no conviction about what he or she is saying–and, instead, just wants to have it both ways.

 

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16 Meaningless Market Phrases – #13

August 22, 2011 By Leave a Comment

“Buy on weakness”

Image: CNBC

When to use it: Any time you don’t actually have the balls to say “buy” but want to be able to say later that you told everyone to buy if the stock should happen to go up.

Why it’s smart-sounding: It sounds highly informed. It sounds prudent (don’t be stupid and chase the stock here). It sounds like common sense.  It allows you to take credit for predicting any bullish move in the stock, while also being able to say “I said buy on weakness” if it crashes. It hedges all future outcomes.

Why it’s meaningless: It’s too vague to be interesting or helpful. It can be applied to almost any stock or market at almost any time. It reveals that the speaker has little or no conviction about what he or she is saying and just wants to have it both ways.

 

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16 Meaningless Market Phrases – #12

August 15, 2011 By Leave a Comment

“Oversold”

Image: Bloomberg

General: The corollary to “overbought.” A classic way to describe a stock or market that has gone down a lot.

When to use it: Any time you don’t know what a stock or market will do but want to imply that it might go up.

Why it’s smart-sounding: It sounds highly informed. It sounds like common sense: The stock just went down a lot–it must be “oversold.” It hedges all future outcomes. (Just because a stock or market is “oversold” doesn’t mean it will go up. It might get more “oversold.”) Again, it sounds like you have command of “technical” and “quantitative” analysis, which always sounds smart.

Why it’s meaningless: As with “overbought,” what does it mean, exactly? Does it mean that traders sold too much of the stock? How can they have done that–the amount of stock in the market didn’t change. Does it mean that traders sold stock at prices that were too low? Okay, maybe it means that. But does that mean the stock is going to go up soon? Why? In short, it’s a fancy and sophisticated-sounding way of saying nothing.

 

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16 Meaningless Market Phrases – #11

August 8, 2011 By Leave a Comment

“Overbought”

General: Another classic way to describe a stock or market that has gone up a lot.

When to use it: Any time you don’t know what a stock or market will do but want to sound generally bullish while also implying that the stock might be “due for a correction” (also meaningless).

Why it’s smart-sounding: It sounds highly informed. It sounds like common sense: The stock just went up a lot–so it must be “overbought.” It hedges all future outcomes. (Just because it’s “overbought” doesn’t mean it will go down. What if it gets more “overbought”?)  It sounds like you have command of “technical” and “quantitative” analysis, which always sounds smart–even though they’re almost always meaningless.

Why it’s meaningless: What does “overbought” mean, exactly? Does it mean that traders bought too much of the stock? How can they have done that–the amount of stock in the market didn’t change. Does it mean that traders paid too-high prices for the stock? Okay, maybe it means that. But does that mean the stock is going to go down soon? Why? In short, it’s a fancy and sophisticated-sounding way of saying nothing.

 

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16 Meaningless Market Phrases – #10

August 1, 2011 By Leave a Comment

“We’re in a bottoming process.”

General: A classic way to describe a stock or market that has fallen a lot and might do anything from here.

Alternates: “Forming a base.” “Bumping along the bottom.”

When to use it: Any time you don’t know what a stock will do but want to imply that it might eventually go up but hedge yourself by saying that it also might go down.

Why it’s smart-sounding: It sounds highly informed. The stock is “in a bottoming process.” It’s “forming a base.” It sounds reassuring, without being too precise. Sure, the stock might drop some more, you seem to be saying, but it’s generally settling in here–and then it will eventually go up. It sounds like you have command of “technical analysis,” which almost always sounds smart (and is almost always meaningless).

Why it’s meaningless: Because it describes a price pattern that has happened but does not tell you anything about what will happen. A drop followed by a sideways move does not mean the stock won’t drop more. It also does not mean the stock will go up. And it commits to no time frame.  It can be used to describe any stock that has moved sideways for a while, without offering the slightest insight into the future.

 

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16 Meaningless Market Phrases – #9

July 25, 2011 By Leave a Comment

“There’s lots of cash on the sidelines”

General: A classic way to suggest that the market will eventually go up.

Alternates: “Dry powder.”

When to use it: Any time you need to explain a bullish outlook.

Why it’s smart-sounding: It sounds like common sense: Wimpy investors are hoarding cash instead of “putting it into the market.” When these investors finally grow a pair and use their cash to buy stocks, the market will go up.

Why it’s meaningless: There is no such thing as cash “going into the market” or “coming out of the market.”  In every trade–every one–a seller sells stock to a buyer in exchange for cash. Importantly, the cash used to buy the stock does not go “into the market.” It goes to the seller. After the trade, the seller now has cash instead of the stock, and the buyer now has the stock instead of cash–and the overall amount of neither cash nor stock has changed. At some times, some investors–mutual funds, for example–might have more cash than usual in their funds (for a variety of reasons), and this cash might eventually be used to buy stocks, but this cash will not go “into the market.” It will go to the investors who own the stocks that the mutual funds buy. In short, again, cash does not go “into” and “out of” the market. Someone always holds the cash, and someone always holds the stocks. So, in a literal sense, the cash is always “on the sidelines.”

 

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16 Meaningless Market Phrases – #8

July 18, 2011 By Leave a Comment

“More buyers than sellers”

When to use it: Any time you are asked to explain why the market (or a stock) is going up.

Why it’s smart-sounding: It sounds like you know what’s really going on, which makes you sound smart and sophisticated. It sounds like you understand how the market works, in a way that Joe Schmo doesn’t.  (Ahh…there are more buyers than sellers! Insightful! Fascinating!)

Why it’s meaningless: In every trade–every one–there is exactly one buyer and exactly one seller. You cannot buy a stock without having someone sell it to you.  To say that the market or a stock is going up because there are “more buyers than sellers,” therefore, is not just meaningless, it’s wrong. What is actually happening when a stock or market ticks up is that the next buyer is willing to pay more for the stock or market than the last buyer was. What is actually happening when the market or a stock goes down, meanwhile, is that the next buyer is not willing to pay as much for the market or stock as the last buyer was. There are never “more buyers than sellers” or “more sellers than buyers.” There are simply different price levels at which a buyer and a seller are willing to trade.

 

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16 Meaningless Market Phrases – #7

July 13, 2011 By Leave a Comment

“Stocks are up on ‘bargain hunting’”

General: The corollary to “profit taking.”

When to use it: Any time you are asked to explain why the market (or a stock) is up after a period of weakness.

Why it’s smart-sounding: It sounds like you know what professional traders are doing, which makes you sound smart and plugged-in. It sounds like common sense: Traders have been sitting on the sidelines waiting for the market to fall–and now they’re “bargain-hunting.” It doesn’t commit you to a specific recommendation or prediction. If the stock or market goes down again tomorrow, you were still right about the “bargain hunting.” If the stock or market goes up tomorrow, you can explain that that traders are now “taking profits” after yesterday’s “bargain hunting.”

Why it’s meaningless: Again, traders buy and sell stocks for dozens of reasons. And for every buyer, at any time, in any market, there is a seller on the other side of the trade. Whether or not the buyer is buying because he or she thinks they have found a “bargain”–and you have no way of knowing–the seller is at the same time ditching the stock, perhaps because he or she is “profit taking.” So collectively describing this activity as “bargain hunting” is ridiculous. Any trade, at any time, in any market can be described as “taking a profit” or “cutting a loss” or “bargain hunting” or “filling out a position,” and so on. You have no way of knowing what’s actually going on. But no one will ever prove you wrong!

 

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