Capital Perspectives: Fundamental vs. technical analysis
By: Chas Craig
Guest Columnist
May 18, 2021
Chas Craig
A friend recently asked why I don’t incorporate much technical analysis (i.e. chart reading) into my investment process. For one, in theory, a weaker form of market efficiency is required for technical analysis to add value than fundamental analysis, assuming both are carried out with a similar level of competence. However, where possible, we try to be more practical than theoretical in this column. The paragraphs that follow summarize the comments I shared with my friend.
I think the concept of “Mr. Market” from Benjamin Graham is the best mental framework with which to approach the market. The idea is that Mr. Market is a highly intelligent person, whose opinion should be respected, but he tragically suffers from bipolar disorder. Mr. Market shows up at your office every day offering to buy or sell securities with you. You, however, have no obligation to transact with him. You can wait until he is in a manic or depressive state.