The Very First Issue

By on May 2, 2006

One past issue will be posted each day starting from the very first issue:

Why Volatility Will Remain Low

August 2, 1996

It looks like Elaine Garzarelli and Doug Fabian got faked out of the market. Their timing could hardly have been worse and it’s bound to cost their subscribers a lot of money (if they followed the advice of these so called experts). The problem with their way of timing the market is that an all or nothing investment stance is simply not prudent since no one can predict the future. Events that we cannot foresee are going to occur and obviously some of these will effect the valuation of stocks. It is wiser to move your allocation in steps relative to the historical march of stock prices (more on this later). There are certainly going to be times of over valuation and under valuation, but these will not be clear, except in hindsight. This does not imply that market timing is useless, it just becomes more difficult as the volatility of the market decreases.

Volatility has been historically low this decade and will remain so. There are several reasons for this; 1) The advent of self directed retirement plans and other automatic means of investing in stocks have created a growing, steady stream of cash underpinning the market, 2) Computer models for stock trading have provided more objective analysis and an improved means of taking advantage of disparities in valuation, and, 3) Availability of information is at an all-time high and will grow over time with the mass acceptance of the internet as a means of disseminating knowledge.

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