I was watching a congressional hearing last week on climate change, and a congressman asked one of the scientists testifying, "but you have to admit if you took the 10 hottest days out of your analysis your thesis falls apart". The scientist replied, "Well, Congressman, I suppose if pigs could fly we could call them airplanes ... but they don't. As scientists we don't have the luxury of taking the 10 hottest days in recorded history off budget. They happened. They are real. And we simply can't deny they happened."
However one feels about climate change the idea of removing data from a model made me think of how we assess companies at Nintai. Do we – out a desire to find the next 10-bagger – alter or remove data about expectations and price that give us inconvenient results? In an age where you can see an ad for Gorilla Trades asking, "Don't you wish your stock picks are HOT like mine?" or a headline from the Street.com that asked "Do Earnings Still Matter in this Volatile Market?" it's easy to see how investors might feel required to fudge things a little bit. Continue Reading »