Frustration by Design

As part of our research, we regularly read the writings of a variety of strategists, and every once in a while we come across commentary that is just so good we feel compelled to share it. The following is such writing, originally authored by Richard Russell and paraphrased by Raymond James Chief Strategist Jeff Saut.

Richard begins:

"Nothing created by the mind of man has ever equaled the stock market in terms of its sheer ability to frustrate people. Why is this? The answer is the stock market frustrates because millions of traders and investors across the face of the U.S., and the world, are all trying to make money out of the market. Now when millions of people are trying to make money in the markets, you know that is difficult to do. Many people are just not fated to make money doing anything, much less beat the stock market. 'It's not fair' you complain, 'why can't all these nice people make money trading and investing?' There is one simple fact that makes this difficult. Throughout history there have always been a small number of financial winners and a larger number of financial losers. So when you say the markets are 'frustrating,' the question becomes frustrating for whom? And the answer again is that the stock market is frustrating to the great number of participants, but highly rewarding to a smaller minority of informed, hard-working, intelligent winners.

What do you have to do to be one of the investment winners? You have to work hard. It's an ironic fact that people are willing to work hard and put in long hours in their own business, or on their jobs, but then they think they can turn around and make easy money in the stock market. Beating the markets is one of the hardest endeavors in the world and these optimists believe that with a modicum of knowledge, a little study, and a large portion of luck they can make money 'playing the market.' It doesn't work that way, never has, never will. Here's what I am talking about. How many analysts, professionals, strategists, etc. have read the great Dow Theory writings? How many pros have ever studied Dow Theory, which is the basis for ALL technical market studies? Frankly, I think I could count on the fingers of both hands the analysts I know who have read, and are familiar with, the Dow Theory writings."

Jeff concludes:

Most individual investors do not have the time, or are unwilling, to do the due diligence to be big investment winners. Therefore, it is paramount to have a good financial advisor. The new millennium is all about the relationship. When our cars break we don't need the cheapest price to fix them. What we want is someone we trust to do the job right and charge us a fair price. And, we want the same relationship with a doctor, lawyer, and especially a financial advisor. Our mantra is, 'Please take stewardship of our money and try to give us a decent return. We don't need a spectacular return, but above all don't lose 58% of it in the October 2007 to March 2009 decline.'"

Richard and Jeff said it all and said it well. We'll be back in touch with you again soon!