The Death of Value?

Young writers never die, they just get dragged out of the door kicking and screaming like a bawling first grader at Toys R Us. In this case, my parental nemesis is not some stone-faced patriarchal authority but my own self-imposed sense of duty to TheStreet.com. Over the last week, I woke up to the cruel reality that my new position here as project manager will inevitably leave me without the time or resources to pen my weekly with any kind of consistency. As a result, I'm hanging up my spurs, relegating myself to the occasional column and focusing on the business issues for which I've been training a good part of my life.

Before I ride off into the sunset, however, I want to launch a parting volley to those who would say that good old-fashioned fundamental analysis has no place in the modern economy. Here's a perfect example of the debilitating effects of a prolonged bull market on the average Joe as culled from my email archive:

Hello Andrew

When I started into the stock market a couple of years ago, I went for Graham's "Security Analysis" for guidance. I actually read the whole thing, and I wish I never did. Wall Street is all about high expectations and dreams, and you have to go with that to make money. That said, I really liked your Benjamin Graham piece. When you wrote it, I tried the seven steps out on paper, using Hoover's, and made a list. I had to bend a little. Absolutely no one had a two-decade record of dividend payment.

Then I forgot all about it and found the list four months later. The stocks had nearly all fallen. Apparently, you can use Graham's lucky seven to find short candidates. If a stock has fallen so much as to fit Graham's parameters, no one likes to own the thing.

Sincerely -- Poul Malling

I've never said that fundamental analysis or even Ben Graham's methodology is some kind of magic bullet, but FOUR MONTHS? Let's get a grip here folks. Managing your money isn't about a backseat quickie in your daddy's Oldsmobile. It's about a lifelong union based on continual growth and commitment through the good times and the bad. There's a reason the vast majority of millionaires in America have been married to the same person for their entire life. The Hollywood-esque concept of a fast-moving day trader making a fortune overnight just doesn't conform to reality.

But hey, lately I feel like I'm talking to a brick wall. The newbie out there who's been dropping odd-lot trades in his new e-brokerage account and making a few hundred bucks here and there is an invincible god. He's convinced that the shining sun is his doing alone. If the clouds roll in it's all about luck or superstition. He makes no attempt to understand the underlying patterns that drive the weather and conform to some well established, albeit imperfect, predictive methods.

Fundamental analysis doesn't give you an airtight methodology to win 100% of the time anymore than a climatologist can predict rain on the second Tuesday of September. But what it can do is provide a window into the underlying mechanisms that drive the market so you can realize that it's more likely to snow in January than July if you're in the Northern Hemisphere.

If nothing else, even a cursory study of fundamental analysis can open your mind to the broader basis from which our economy operates, much the same way that an afternoon trip through the Met can put that velvet Elvis hanging on your living room wall into stark perspective. So maybe you're never going to fill your home with Rousseau or Bierstadt. It's still good to know that the basis of art is more than a random event or a dime store paint-by-numbers set. And who knows, you just might find something along the way that changes the way you look at the world and your investments -- for the better.

The bottom line is that the markets are a lethal product of primal instincts and bedrock financial principles. To the newcomer, it looks like random static that's beyond comprehension. And that's where most folks stop. They give up hope of understanding anything based on a few disconnected experiences without ever striving to find the hidden commonalties or causal relationships. They never discover that once you learn the basics, patterns begin to emerge through the haze and the world becomes less mysterious.

Does that mean that an effort to acquire a deeper understanding of the markets pays off over few weeks or months? Don't count on it. Even the Sage of Omaha has the occasional bum year, as evidenced in 1998. The difference between him and the rookie is that Warren Buffett has perspective based on a mastery of market principles that gives him unshakable confidence, helps him stay the course, and allows him to achieve success over decades.

If nothing else, I hope that my series of weekly columns and my series on the basics of fundamental analysis has convinced you that, even without a background in finance, you CAN learn this stuff. The topics aren't inaccessible. Sure, it takes some effort, but that's what separates the wise from the chumps 20 years hence.

Don't give up. Keep on learning. And keep on sending your questions my way if you get stuck. I'll try my darndest to pen the occasional column to help out when I can.

Finally, thanks for all of your support. It's you, the readers, who make TSC great, and it's been a privilege to work with you all. I won't be far away, so look for me around the next bend.

>To order reprints of this article, click here: Reprints