What’s The Worst Rule Of Thumb Commonly Cited In The Market? by David Schawel, Economic Musings
Markets are complex and often investors search for short cuts or “rule of thumb” thinking to make it easier. Unfortunately this is not always the most prudent approach to investing and can result in mistakes. Yesterday on Twitter, I asked what’s the worst rule of thumb commonly cited in the market. Here are some responses:
@HFBondsTrader sell in may…
@EquityNYC Pigs get slaughtered
@BarbarianCap stocks trade at 15 P/E
@montoyan maximum pain
@modestproposal1 the crowd is always wrong
@zshrier Your bond allocation should = your age.
@DavidTaggart Just do what WarrenB does
@CBHolsinger with the dividend, I am getting paid to wait i
@AlexRubalcava No one goes broke taking a profit
@LadyFOHF ‘it’s the algos’
@JFinDallas “It’s down so much it has to bounce.”
@DumbLuckCapital Gross margins are somehow indicative of business quality
@Royal_Arse active > passive.
@DumbLuckCapital ok if the a Tiger Cubs are doing it
@BarbarianCap stocks always go up in the long run (actually diversified, price momentum market indexes have do so for ~1% of human history)
@EquityNYC Diversification is the only free lunch
@DumbLuckCapital Leverage is bad
@MicroFundy “getting paid to wait”
@MicroFundy risk = volatility
@BluegrassCap market cap to GDP
@PScatterpatter “this stock has valuation support.”
@DumbLuckCapital PEG ratio of 1 or higher somehow means something good, even though 1 is an arbitrarily convenient cutoff signifying nothing.
@BrattleStCap assuming “the market has this one wrong” when the market is actually dead-on the vast majority of the time
@Valuetrap13 That a company is not a value because its P/E is too high, which ignores tons of factors
@TheStalwart “hope is not a strategy“
@spiegema to that end…’you have to be contrarian to make money’
@EquityNYC “value” = low P/E, P/B, EV/EBITDA
@LadyFOHF “More sellers than buyers” Or vice versa.
@BrokenBanker consensus is wrong
@kit_lowe That move was related to a physical deal…
@ArbCowboy default rates are at a historic low, we’re in the sweet spot, anything on CNBC, follow the smart money, everyone’s doing it
@JodyShenn Just use 15 CPR for the pricing speed?
@chigrl explaining every up move with “short covering”
@aneep if you liked it 40, you should love it at 30.
@HaidiLun Citi’s “It’s not a bubble until it doubles” call this week on China
@EdBorgato Viewing a stock at a discount to market as cheap and one at a premium as expensive rather than valuing it on absolute basis.
@ParHedge “Only price pays”
@awealthofcs stocks are riskier than bonds
@michaelsantoli That it’s rigged.
@JBoorman “you’ll never go broke taking a profit” (you will if u don’t take losses even quicker)
@oknotsomuch buyside know what they’re doing
@timothydh chiding any and all “this time it’s different” arguments. It’s always different
?@ZipperTheory anything Jesse Livermore (investor not blogger) related x 10^2