I guess it should not be surprising that many people have short memories. A "What have you done for me lately?" patina colors almost every sector of public opinion: Athletes get hit with it, politicians get it, companies get it. If you're not producing now, you're nothing.
This year the Rule Breaker portfolio, among all of our real-money portfolios, has been shredded by negative sentiment from practitioners and media alike, stemming from its horrid 2000 performance of -50%. Suddenly the proponents of "buy quality at any price" are looking for someone or something to blame, and David Gardner -- with his bubbly, eminently positive view of the stock market -- makes for as good a target as any.
What I find interesting about the witch hunt is two things: First, David stated at the beginning of 2000 that he was comfortable with the prospect that his portfolio (the Rule Breaker is his money) could lose a significant portion of its value over the year; and secondly, that we are seeing from many correspondents that one of the "lessons" learned from the carnage in 2000 is that investors "ignore the charts at their own peril," or something similar.
Technical analysis received a pretty big publicity boost in 2000, given the long, tortuous decline in several sectors popular with individual investors. I think that some of this attribution is faulty: Over the last nine months, those with some money on the sidelines inherently did better than most of those who were fully invested. Yep, long-term buy-and-hold sure took it on the chin.
The Rule Breaker has never been advertised as anything but a high-risk portfolio, nothing less than a venture capital portfolio. Ask any VC and he will tell you that, give or take a few percentage points, he EXPECTS more than 90% of his investments to lose money, and that he will actually earn the majority of his returns on 1% of those investments made. This is why "price doesn't matter" for Rule Breakers, because so few of them are expected to succeed, and those that do will do so brilliantly. It is an aggressive, high-risk way to invest, one to which I would only allocate a small percentage of my capital.
Using such methodology, of course price is less valid than a firm grasp of how the company expects to make money. I have seen no one yet who has devised a good model for valuing Amazon.com (Nasdaq: AMZN), except for those who can make a pretty good case that it is zero (and, of course, Paul Commins' YGBFKM methodology). David can speak for himself, but I would like to say that of all of the messages of Fooldom, this one may be the one that has been most poorly communicated and thus misrepresented.
Technical Analysis is a simple science: It states that stocks that are in motion tend to stay in motion, that a stock that rose today is more likely to rise tomorrow. It is a powerful tonic for those who are terrified by the notion that short-term stock market movements are without rationality. Technical Analysis allows investors to say "Ignore the reasons, they are meaningless. Focus on the patterns." The pure technician ignores such basic concepts as stock value, price, or other fundamentals on the belief that the institutional investors leave telltale signs when they are moving into or out of a stock, and that the "smart money" telegraphs its actions by virtue of its sheer size.
This is a powerfully attractive theory, and I do not doubt that there are those who can practice it with some success. But these people are not the "average" technical analysts. They are, in fact, few and far between.
Ovarian Cysts No More