Why Voodoo Finance?
I decided to call the blog Voodoo Finance after the first post I ever posted on it - it wan’t even a blog at the time.
What exactly is the purpose of the blog?
The sole purpose is to provide myself with a medium with which to state and track my opinions of financial securities. I’d like to use it as motivation to track a wider number of industries, and will help me look back tomorrow on different predictions I’ve made. It is not in any way a stock reccomendation site of any kind. There are several of those out there, and you should take them all with a grain of salt.
What are your investing principles? Do you use techical analysis?
The use of common sense. The stock market is not the place for complex mathematics and algebra. You don’t even need real time quotes, lightning fast stock brokers, and 24 hour coverage. But you do need lots and lots of information. I believe that the majority of your positions should be chosen based on value investment principles, that is, do not buy a security if the price is not reasonable, and above all do not speculate.
What does voodoo finance mean?
Voodoo Finance is what some investors call technical analysis - also known as ‘chart reading,’ the practise of treating a stock price as a complex time series that presumably has a relatively simple underlying trend. This is not the best of ideas, as it tends to focus entirely on the price and completely disregards the actual company the stock ticker represents.
I hear that Bollinger Bands/Moving Averages/Parabolic SAR/other indicators work.
They probably do not work. Although technical analysis is a noble idea - afterall, computer science has managed to solve countless problems by treating complex data as predictable underlying series, such as voice recognition. However, if you use the same strict techniques to evaluate technical analysis measures that you would use to evaluate voice recognition algorithms, you would find that most technical analysis fails miserably.
Besides, even voice recognition that does a pretty good job of filtering out noise, does make mistakes, more than it should. A single mistake (a buy instead of a sell) could cost you a fortune. If you believe in artificial intelligence of course, especially if you’re part of the reductionist movement, you’d agree that we can program a computer to recognise a rational decision based on the data provided to it, such as a P/E ratio for the company and the industry, a growth time series, economy indicators, and every other economic indicator imaginable, and a good system would figure out which indicators work well and what decision they consider rational about an individual position. However, this is not the state of the art with technical analysis (nor is this the scope of technical analysis.) The closer analogy would be comparing what I have just described as astronomy to the astrology that is technical analysis.
I see on your resume you are a computer science graduate. Why a finance blog?
That is true; I am involved in finance as a hobby, and wish to learn more about it, and this is one of the best ways possible.
Do you have open positions in any of the stocks you mention? Are you employed by any of these companies?
Quite possibly. I’m not sure yet what the law requires for non-professional authors. I am not employed by any company I write about at the time of writing. If you keep a blog, keep your employer out of it - distributing entrusted information is unethical regardless of the intention.