| To paraphrase Sean Hannon of Seeking Alpha, | | | | bottom line... and your own job. |
| one of the main principles of value investing is | | | | Still, we continue to be amazed at the hesitance |
| that every asset is appealing at a certain price. As | | | | of professionals in investor relations to speak |
| Hannon notes, people seem to be using that | | | | openly, generally, and practically about factors |
| reasoning a lot these days. But where did the | | | | that affect their equity markets. Think of yourself |
| value investors go? | | | | as the Ben Bernanke of your own currency, your |
| Hannon mentions modern portfolio theory, which | | | | equity. Your job involves knowing what forces |
| propounds that focusing on individual asset value | | | | affect supply and demand of your shares. There's |
| but not looking at relative value and risk to the | | | | no reason to be afraid of it. |
| portfolio is like finding a great seat on the deck of | | | | One the easiest things to do is to look at your |
| the Titanic. | | | | stock environment like the Federal Reserve sees |
| Joking aside, we don't want to drone on about | | | | the money supply in markets. The Fed considers |
| investment theory: we want you to do look cool | | | | its uses then decides what policies to set and |
| in your investor relations or executive chair. But | | | | what to tell the markets. |
| looking good has gotten a lot more difficult... and | | | | Participants in the equity markets use your shares |
| lost some of its allure, too. It's not easy to watch | | | | for three basic purposes: for rational investing; for |
| the red on your screen show downward trends in | | | | risk-management in portfolios; and for short-term |
| your share price, particularly when you have to | | | | speculation. There is patently nothing wrong |
| figure out how to explain it to your CEO or an | | | | whatsoever with explaining that your shares are, |
| angry major investor. | | | | for instance, currently used significantly for |
| Put differently: when there's no fundamental way | | | | speculative purposes and are therefore lagging |
| to explain price performance, what can you offer | | | | levels that rational investors assign. |
| about other subjects, like speculative trading or | | | | All that stands between you and these rather |
| risk managers' actions? | | | | powerful answers is a bit of knowledge and |
| Let's look first at what you can't say. Don't say | | | | information. So get to know your market |
| "We believe (big institutional holder #2) is selling." | | | | structure. Just a gentle reminder for these |
| For one thing, you can't know that for sure. | | | | turbulent times. |
| Besides, it could be materially harmful to your | | | | |