Translating “It’s a Good Buy for the Long-Term Investor”

Monday, March 22, 2010

Great stuff from Charts and Coffee, this commentary made me laugh so I had to repost:

I don’t watch CNBC much, but I do sometimes turn it on to catch the news headlines in the morning. Often they bring "market gurus" on to give opinions on the market and specific stocks. One common response I hear from Wall Streeters is:
“XYZ company is a great stock if you are a long term investor.”
Once I hear this response, I know the commentary is completely worthless. The real translation is:

1. "I think the stock is going down. But, if you hold it for 10 years it might recover and even appreciate."
Practically any large cap company that is not in danger of insolvency has a decent shot at being a good long term investment. If it can stay in business, there will likely be appreciation if you extend the timeframe out long enough.

2. "I’m not going to stick my neck out. Rather than admit that I don’t want to comment on the stock, I’ll hedge by saying it is a good investment for long term investors. This way, if 6 months from now the stock is down 50%, I can say it is still a good investment over a long timeframe. Thanks to hedging, I can never be wrong."
Of course, 10 years later nobody remembers the guru’s pick.
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