Brown’s Investing Rule #76

Brown’s Investing Rule #76

The fancier the math one uses to justify an entrenched investment opinion, the more obscure and arcane the indicators employed, the more desperate and wrong that person is.

We don’t resort to algebraic equations when we’re on the winning side of a trade and confident that we have gotten the broad strokes right. It is only when our backs are against the wall and the core beliefs we’ve publicly held have proven to be ineffective or incorrect that we resort to mining for “new” data from decades ago to re-prove our original thesis. This is more about saving face and nursing a bruised ego than it is about making money.

Everyone has been there and done this, with market calls and with individual stocks. Note the daytrader who, when caught in a down stock, begins doing fundamental research on the company to make himself feel better. Or the market-timer who’s got a shiny new measure each week by which he can show that the market is over-extended in one direction or the other.

But the worst exemplar of this sort of thing is the pedantic genius who has such high regard for his own superior intelligence that he actually believes that it is the market – and not himself – that is in error. He could not possibly have misjudged things and, by the way, here are nine forumlas and six charts by which this simple fact will become inescapable.

“Here’s the mathematical proof, presented in as sophisticated a manner as possible, to show that even though I’m wrong and have been forever, I am really right after all.”

Do yourself a favor – check into a mental hospital and write your magic equations on the wall with your own blood and excrement. The nurses will be very impressed.