We are all too familiar with “dog whistles,” defined as coded language intended to appeal to a group of people in a subtle way.
The use of “dog whistles” is endemic in the financial media. They’re very adept at it, which makes it insidious and dangerous to your financial well-being.
Here’s my take on some commonly used “dog whistles,” and what they really mean.
You are supposed to rely on the “legend” for investing advice. He or she (usually “he”) made obscene amounts of money running a hedge fund, and probably underperforming a risk-adjusted index fund.
Don’t get me wrong. This person is worthy of the “legend” designation. Think of how difficult it must be to convince investors to pay them ridiculous fees when they would likely get superior returns buying a vanilla index fund.
One of the “experts” must be right, correct?
Or you could just throw a dart at a board and be guided accordingly.
The “dog whistle” here is that these “experts” have some special insight into the future. They don’t. It’s an elaborate scam intended to divert you from factors you can control and into the waiting arms of your friendly brokerage firm (who just coincidentally employs one of these “experts”).
“Technicians are watching”
Surely complex charts and graphs have predictive power, right?
I can’t find evidence for it.
Here’s an observation that has merit: Most academic studies are skeptical about the merits of technical analysis. Any small advantages gleaned from charts are quickly lost when factoring in broker commissions and taxes. A long-term, buy-and-hold strategy is often far superior.
That’s the view of Federated Investors’ “top market watcher,” Phil Orlando.
He could be right or wrong, but he can’t be relied on to accurately predict the direction of the market.
Don’t confuse luck with skill. Tomorrow’s news drives market prices. Mr. Orlando doesn’t have psychic powers.
The dog whistle here is that some guru can do the impossible.
The hope is you’ll believe this myth and use the firm employing to guru to buy and sell stocks based on their prediction.
“Chief investment strategist”
A fancy title intended to convey the impression this person can engage successfully in market timing or stock picking.
“Why the sell-off isn’t that serious, yet.”
Tortured and often unreliable “explanations” are no more than musings of those who love seeing their name in print and hope it will result in business.
They make astrologers look good.
Movements in the market are random. Trying to explain them is akin to “explaining” the results of a coin toss.
It’s all noise. Ignore it.
Resource of the week
If you are tempted to rely on technical analysis, this article should change your mind.