When billionaire investors tweet tips, should you listen?

Billionaires and other celebrity investors are taking their message to Twitter. Should you listen?

 

Billionaires and other celebrity investors are taking their message to Twitter. But should you listen?

Carl Icahn is perhaps the best-known investor using the online short-messaging service to broadcast his stock picks to the world. Last week, he congratulated himself on Twitter for pressing Forest Labs to sell itself. Shares of Forest soared nearly 30 per cent last Tuesday after agreeing to be bought by Actavis for $25 billion.

But Icahn is hardly alone. Other financial minds, including economist Nouriel Roubini hop on Twitter to talk about what’s on their minds. These celebrity investors are so well-known it’s easy to get convinced they’re dispensing helpful stock and investing tips. But it’s important to remember that these celebrity investors’ Tweets aren’t necessarily appropriate for you or your portfolio.

Stocks don’t always respond to their famous Twitter members. Icahn was talking up shares of Apple before it reported its disappointing fourth quarter. Shares fell about 8 per cent a day after the report.

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As bull market turns 5, volatility is rising...

The “pickup in volatility is consistent with a maturing bull market,” says Sam Stovall, chief equity strategist at S&P Capital IQ. Stovall’s data show price swings are more dramatic in the early years of bull markets, level out in the middle years, then become wild again in a bull’s later years.

The reason is that early in bulls, investors aren’t sure it’s for real. But as the rally matures, “and the memory of the pain inflicted by the prior bear market recedes, investors become conditioned again to buy the dips, thus triggering fewer 1 per cent days,” he says.

When aging bulls near six, the wild swings return as investors again become wary of down days.

If U.S. stock market gyrations seem more frequent this year, it could be due to the fact that the bull market, which turns 5 on March 9, is getting up in age.

The average bull since 1932 has lasted a little less than four years, says InvesTech Research.

So far in 2014, there have been nine days in which the Standard & Poor’s 500 stock index finished up or down 1 per cent or more, twice as many times as this time a year ago.

The “pickup in volatility is consistent with a maturing bull market,” says Sam Stovall, chief equity strategist at S&P Capital IQ. Stovall’s data show price swings are more dramatic in the early years of bull markets, level out in the middle years, then become wild again in a bull’s later years.

The reason is that early in bulls, investors aren’t sure it’s for real. But as the rally matures, “and the memory of the pain inflicted by the prior bear market recedes, investors become conditioned again to buy the dips, thus triggering fewer 1 per cent days,” he says.

When aging bulls near six, the wild swings return as investors again become wary of down days.

Source