For someone that writes a lot of words about investment, I’m not a fan of financial narrative. Most of it will lose you a ton of money.
Innumeracy is not a good place to start from in investing and I would imagine that there are not a lot of successful investors or traders that are not good at figures. If you cant do the numbers you are left at the mercy of people who spin words and that is a very hazardous place to be.
In a world where I keep seeing things like an advert offering some thing ‘Yours Free for only $29.99’ and Unlimited internet connections that are limited to 3GB, I’m left rubbing my yes in disbelief.
It is important to get numbers right. Not just digits, but rations and terms too.
It has forever irked me that it has slowly become ‘de rigeur’ amongst the clueless of financial commentators to claim a bear market is when the market has fallen 20%, but not before, which to me is like defining an accident as when the unlucky faller hits the pavement, not when they fell out of the window. In the markets it is not useful to predict the past and telling an audience a bear market has kicked off after it has fallen 20% is of no use at all. A bear market starts the moment a not to be repeated high has been hit and the market is headed down for an extended period. Conversely a bull market kicks off once a bottom has been ht and the market is heading up for an extended period of time.
The new clueless way of defining it, invites the age-old fools trading pattern of selling the bottom and buying the top. The old way you would buy the bottom and sell the top, but the trouble is you have to understand the market to call the beginning of a bull or bear market rather than declare it in retrospect.
Only the novice will come unstock but they are the vulnerable and are the ones that most need of accurate information the media says it sets itself out to supply.
Now there is another punditic monstrosity rearing its ugly head.
Let me help you with this. If you read the following in an article, you can instantly disregard the information contained in the body of the offending piece.
Here is an example:
“The stock price has fallen to 10 times less than it was a year ago.”
You have to be both illiterate and innumerate to write such a thing.
You might say ‘a tenth’ or 10%, but ‘ten times less’ is not a thing. You cant multiply something by an integer and make it smaller. That is what divide is for. Yes its very sad that ‘ten divide less’ doesn’t look right either and ‘if you take its original value and divide by ten you get the current value’ is too long and clumsy for even the most audacious writer who English is not their first language, but that is just journalistic tough luck. ‘has fallen by 90%’ should not be to challenging for any financial audience and if it is there is still no reason to throw gobbledegook at them.
The investment world is full enough of bad advice without another layer of nonsense. We can do without these incalculables as much as we can do without bear markets that start after crashes and corrections that kickoff after major slumps.
Otherwise I will one day wake u to find a 50% rise is instead a market that has gone up half times more.