The phrases “short-term overbought” and “oversold” are terms that are applied to the stock market. They are avidly followed by some investors as a means to determine the short-term direction of the stock market. Sometimes they are projected incorrectly to the long-term trend, which can be a huge mistake.
This column has quoted members of the Rothschild family from time to time. Most of us at one time or another has heard of this family. Who were they and what did they do? In short, they were one of the most renowned private families in Europe and one of the greatest Jewish families of modern times. They helped shape nations, empires and industries in the 19th century.
Many people buy far too many individual stocks for their portfolio. This is especially true when buying multiple mutual stock funds. While they often feel that they are gaining much more diversification and thus less risk adversity, it is usually not the case. In fact, many stocks are simply in redundant industry groups, and if the group enters a bear (down) phase, most stocks in the group participate on the downside. In fact, during a general bear market, nearly eight out of ten stocks participate in the general decline.
Reputation is an important asset to corporations and those who know it do what they can to build it. To achieve prestige requires a long-term outlook toward building competitive advantage. Companies develop winning reputations by both creating and projecting a set of skills that their constituents recognize and are unique. For some companies, that means differentiating themselves through innovation—nurturing good ideas, translating them into products, and marketing them well.
Market experts often refer to the general market. What is the general market and why is it important? In broad terms the general market is represented by leading market indices like the S&P 500 or the NYSE Common Index (an index of all of the stocks listed on the NYSE).
An old Wall Street adage holds that a stock is worth what somebody is willing to pay for it. However, even more appropriate is an adapation of that adage by Investment Advisor Richard Ney (1916-2004.) He used to say “a stock is worth what the NYSE floor specialist is willing to pay for it.” In any case, both have more merit than all of the blue sky that so-called “investment experts” tell us what a stock or the stock market is worth.