Wednesday, February 07, 2007


Hey Friend, Don't Talk Cock-Lah!
Anchor & Adjust Away

If there was one thing I learnt from this subject I took called Decision Making & Statistics, was Anchor & Adjust as a common form of decision making. Readers of this blog will be familiar with the concept as I use it all the time to bash the so called expert opinions.

A&A can hide incompetence and mask sub-par analysis. All you do is anchor to the most recent point of reference and adjust up or down according to available data. While that is not wrong, it is a chicken-shit way of analysis or offering an opinion. A bit like "after the horse has bolted", and all the expert is saying is "well, I think he went that way, and should continue doing so".

So it is certainly not surprising that many local and foreign research houses have come out with chest-pounding press releases in recent times. For someone to come out this week and saying "Bursa Malaysia is expected to surpass the Kuala Lumpur Composite Index’s (KLCI) all-time high of 1,332.04 in Januray 1994 based on the current rally, underpinned by the increased liberalisation of economy, accommodative fiscal and monetary policies and improving corporate returns on equity (ROE)" ... is pretty much talking cock-lah. Where was the prediction when the index was at 1,000 a couple of month's back (just a couple of months back)? These so called experts will A&A their predictions and think of new reasons to justify their existence and the desired levels, but will not stray from the pack, cause it is safe.

Part of the reason why there is so much talking cocks and b.s. is also due to the very average journalistic ability and integrity exhibited in most Asian papers. To parrot opinions without "sifiting out the chaff from the wheat" give rise to empty headlines and little-value-add information in an era of information overload. Besides just reporting news (biz news in particular), to move from being mere reporters to journalists requires investigative journalism, thought-provoking commentary and hard line questioning. Need to move up the ladder, y'all.

Show me one person to predict 1,300 for KLCI in 2007 anytime in their analysis last year. ???? Where are the so called experts... hmmm... go fly kite lah with so much hot air around! I can safely say when index reaches 1,300 ... some other a-hole will come out and say there is a good chance for the index to reach 1,380 within the next 6 months ... OMG of course la ... don't say things which makes people KNOW how average and pathetic your mind is.

Seriously, a good analyst will be able to come up with a decent thesis for the KLCI to be at 900 or 1,200 or 1,500 ... all within 15 minutes. Give me a level and I will tell you a story, usually its called b.s. but if I do it persuasively well, you will nod along in agreement. Hence to sift out the really good opinions from mere stuff that smells of ammonia is to seek out:

a) consistency of argument and logic
b) ability to defend stance taken
c) correct short term views should be taken with a ladle of salt
d) correct long term views with solid big picture arguments should be given more weight
e) the ablity to locate market catalysts 6, 12, 18 months down the road
f) must be persuasive

3 comments:

Boon said...

Hello this is Boon from Trade Bursa Malaysia. I am a regular reader of your blog and have cited your blog in mine in a number of occasions. Any chance for a link exchange? Thanks!

Salvatore_Dali said...

done

Boon said...

Many thanks!