Recently, I came across a marketing pitch that described the current equity environment as being full of opportunity for good stock pickers. This is not the first time I have heard this claim, nor do I suspect it will be the last. Perhaps the people making the claim even believe it to be true. The problem — it seems to me — is, at best, one of consistency of candour and, at worst, one of deliberate misrepresentation.
In the interest of full disclosure, I personally do not believe that there are some circumstances when stock picking is likely to be more fruitful than others. To me, markets are markets, and it is doubtful as to whether or not any change in broad “macro” conditions would have a material impact on the outcomes of various strategies involving fundamental or technical analysis, program trading, market timing or any other approach.
But that’s just me. Let’s say you’re of the opinion that there are clear and distinct parameters that might allow for the shrewd use of these or other strategies in order to add value for investors. If this is indeed the case, what will the proponents of this “opportunity” say when the opportunity ceases to exist?
What, exactly, do people mean when they say this is a good market for stock pickers? I disagree with the practice of suggesting the time is right for something without also being clear on when the time is not right, especially if the client’s best interests are supposed to be held paramount. Some people take the view that it is always a good time for strategic trading and stock picking. To these, I ask: Why do you then say that now is a good time when your actual position is that it’s always a good time?
There are others who genuinely think that there are good times to be stock pickers and bad times to be stock pickers. My question to them is, Do you go out of your way to tell people that the market is actually bad for stock pickers? If there really are good and bad environments in which to pick stocks, why is it that I hear you talk about it only when we are in “good” environments?
Furthermore, if one says it is a good time to be a stock picker, then one ought to have compelling evidence to support the notion that stock pickers do better in such a market than might otherwise be the case. To those who make such claims, might I see the evidence, please?
Here’s a little test. Ask those people who use the “it’s a good opportunity for stock pickers” line a few simple questions:
• In your view, is this superiority of circumstance sometimes the case or always the case?
• If always, why do you infer that the decision is circumstantial?
• If sometimes, when was the last time it was bad for stock pickers?
• In the past, when it was a bad time for stock pickers, did you tell your clients it was a bad time?
• Better still, in the past, when it was a bad time for stock pickers, did you encourage your clients to move to non-stock picking strategies?
• Looking forward, if now is a good time for stock pickers, can I expect you to tell me when it’s a bad time for stock pickers?
I believe there are some people out there who want it both ways. Some people might even try to encourage other people to trade more and use all kinds of rationalizations to do so.
I expect more from STANDUP advisors. Truly good client-focused advisors mean what they say and say what they mean.