Stocks & Commodities V. 24:12 (48-56): Interview: Robert W. Colby, CMT by Jayanthi Gopalakrishnan
Product Description
Robert W. Colby is senior investment strategist at TradingEducation.com and RobertWColby.com. He is also a consultant to institutional and private investors
and traders, providing custom research services and trading systems tailored to clients’ objectives, whether it’s short-term trading, long-term investing, stocks, or
commodities. Why is the name so familiar? Well, if you’ve been around technical analysis for any length of time, you’ve probably flipped past the name. Colby is the author of The Encyclopedia Of Technical Market Indicators (second edition, 2003), the standard reference for indicator and trading systems design. Colby previously worked at several large Wall Street firms as a proprietary trader, technical analyst, fundamental analyst, and adjunct instructor at New York
University and New York Institute of Finance, where he developed new courses on investment analysis and market timing.
STOCKS & COMMODITIES Editor Jayanthi Gopalakrishnan conducted a telephone interview with Colby on October 5, 2006.
Q: I know you’ve been in the industry for a long time. Since…
A: Forever! 1969.
Q: I understand you did fundamental analysis when you started out.
A: Yes, I did.
Q: What made you focus more on technical analysis?
A: What cemented it for me was the bear market of 1973–74. I could see the fundamentals meant nothing because stocks were in a downtrend and that was all that mattered. It didn’t matter how much net cash assets the companies had, or what their earnings were. Things went down anyway. Down, down, down, day after day. That was an eye-opener for me. I was working as a fundamentalist at A.G. Edwards & Sons and getting paid for it, but it just became obvious the market sometimes just ignores all fundamentals. Fundamentals just didn’t matter. I saw it again later on occasions where stocks would be undervalued with earnings growing at above-average rates for years on end, but the market would just ignore it.
Q: So fundamentals were being completely overlooked?
A: Yes. It was particularly evident during the late 1970s. The market just didn’t care. Investors weren’t willing to pay up for stocks. The uptrends didn’t last, and stocks were really cheap and stayed that way for years. Now, it’s a little different. The dividend yield, for example, was fairly high during the late 1970s, compared to recent years. The bull market came in the 1980s and valuations started to increase all the way up to 2000. At that point, stocks got very expensive. Since 2000, stocks have become less expensive — but not cheap.
STOCKS & COMMODITIES Editor Jayanthi Gopalakrishnan conducted a telephone interview with Colby on October 5, 2006.
Q: I know you’ve been in the industry for a long time. Since…
A: Forever! 1969.
Q: I understand you did fundamental analysis when you started out.
A: Yes, I did.
Q: What made you focus more on technical analysis?
A: What cemented it for me was the bear market of 1973–74. I could see the fundamentals meant nothing because stocks were in a downtrend and that was all that mattered. It didn’t matter how much net cash assets the companies had, or what their earnings were. Things went down anyway. Down, down, down, day after day. That was an eye-opener for me. I was working as a fundamentalist at A.G. Edwards & Sons and getting paid for it, but it just became obvious the market sometimes just ignores all fundamentals. Fundamentals just didn’t matter. I saw it again later on occasions where stocks would be undervalued with earnings growing at above-average rates for years on end, but the market would just ignore it.
Q: So fundamentals were being completely overlooked?
A: Yes. It was particularly evident during the late 1970s. The market just didn’t care. Investors weren’t willing to pay up for stocks. The uptrends didn’t last, and stocks were really cheap and stayed that way for years. Now, it’s a little different. The dividend yield, for example, was fairly high during the late 1970s, compared to recent years. The bull market came in the 1980s and valuations started to increase all the way up to 2000. At that point, stocks got very expensive. Since 2000, stocks have become less expensive — but not cheap.
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