Somehow, I'm not impressed.

The University of Melbourne
No. 22 in the World, No. 10 in Social Sciences
World University Rankings 2006 published by the Times Higher Educational Supplement, UK, October, 2006

Seen as a signature on one of the outgoing uni emails. Clearly, putting up bright blue signs saying the same thing along the Swanston St side of campus is not enough. My knee-jerk reaction upon seeing this was - The University of Melbourne, No. 1 Championer of Mediocrity. But we all knew that already. Is 'championer' even a word?

There's been a fair flurry of activity these few months, mainly involving me working, organising things and looking forward to returning to the home away from home in Melbourne, for more reasons than one.

Work finishes in two days; that is very good news. Admittedly, this 1 month plus stint has offered me excellent and highly relevant exposure to the working world and to the equities market, but I think that's enough for one holiday. For those interested, the Malaysian stock market is bullish at the moment following strong buying interest from foreign institutional investors. Of course, when the market reopens later at 2.30pm, your guess is no better than mine which way it will go.

It really presents a futility of sorts to the work I do, and the work I see people doing here at the research dept. Every morning, the technical analyst will prepare technical reports of the KLCI and every morning, I come in and read the day's predictions of the market's movements, only to have it rendered irrelevant within 5 minutes (okay, maybe half an hour) of the start of trade. Unlike predicting the weather, where there's a science to it, trying to predict the stock market's movements, especially using theory and models, requires you to eat your words a lot of the time. Either that, or make the sort of analysis at a level of vagueness to rival the horoscopes.

So let's take a holistic, macro view of things. Yet, one cannot be sure how and how much each of the variables affect the market, at the same time, unpredictable irrational behaviour must not be underestimated. One day, I read news reporting that anticipation of an interest rate hike by the Bank of Japan helped pushed bank stocks and thusly, the Nikkei up to close in the green. Next day, the Nikkei closes lower, allegedly after certain reports questioned the likelihood of an interest rate rise. While it is likely that interest rates weren't the only variables these two days, it just seems that the writers are just arbitrarily picking any explanation that can justify how the Nikkei moved, and whether or not these explanations are really significant, it's hard to know.

Even with work like company reports, stock recommendations and earnings forecasts, analysts are forever revising their estimates everytime a material event occurs, which to some extent, defeats the purpose of their work. It's never much help until what they forecast happens, and when it does happen, it's too late. It's a bit of a catch-22. Yet, we go through the motions, day after day.

In my view, any real use this research department can offer are fundamental analyses of companies - prepare reports that probe into the foundations, dig behind the creative accounting and sum up the management of a firm for the purpose of long-term investment. Short-term participation in the stock market is just short of a gamble, and has far less use for such information than a genuine mid-to-long term investment plan.

I suppose I'm taking a rather harsh and cynical view of this research and analysis work. One thing to consider as well, is that the firm I'm at is a small one, whose clients are mainly retail investors who don't really care nor understand the figures in the reports. They're mainly interested in the bold BUY/SELL/HOLD recommendation at the top of the page. Working for the bigger players like JPMorgan would be somewhat different, I'd imagine, perhaps a little more meaningful. I'd like to find out, someday. :)

With that I shall end my little spiel. On a lighter note, here's quote I found highly amusing. I think it was CJ who first told it to me - "Investment is speculation gone wrong."