Market Rules to Remember

Last updated

Market Rules to Remember is a list of ten cautionary rules for investors that was written in 1998 by the then-retired Chief Market Analyst at Merrill Lynch, Bob Farrell. The rules became iconic on Wall Street and are frequently reprinted in leading financial advisory publications. [1] [2] [3] [4] [5]

Contents

Background

In 1955, Robert "Bob" J. Farrell graduated from Columbia University with a master's in investment finance, where his teachers included Benjamin Graham. [6] [7] After 2 years of service in the US Army, Farrell joined Merrill Lynch in 1957. [2] [7] [8] By 1967, was made Chief Market Analyst (CMA) at Merrill, a title he held for over 25 years until stepping down in 1992, then aged 60. [9] [10] For the 16 of his last 17 years as CMA at Merrill Lynch, Institutional Investor voted Farrell as America's best analyst in forecasting equity market direction, [9] [8] [10] and he was inducted into the "Hall of Fame". [6] [7] Farrell is considered a pioneer of technical analysis, and he is noted as being the first to incorporate "sentiment analysis" into financial forecasting. [2] [7] [8] In 1970, he was made the first president of what became the CMT Association. [3] [11] [7] [10]

After stepping down as CMA, Farrell stayed with Merrill as a senior investment officer writing regular reports for clients. [9] In September 1998, as the dot-com bubble was nearing its peak, Farrell published a list of ten "Market Rules to Remember" on the back of one of his reports. [3] The rules received little attention when they were first published, and Farrell retired fully in 2002 after 45 years with the firm. [2] [3] Merrill Lynch chief North American economist David Rosenberg re-published the rules in 2003, after the dot-com bubble burst, and they have been quoted by financial advisors ever since. [4] [3]

Rules

In 1998, Farrell laid out his "Market Rules to Remember" as follows: [3] [4] [5]

Legacy

In 2020, CNBC said: "Some would say Farrell was immortalized by his rules of investing that remains widely quoted today". [4] In 2021, Morgan Stanley said to their clients about Farrell's rules: "... they are pinned to the wall or taped to the screen of market professionals all over the world. A Google search of “10 Market Rules to Remember” reveals 305 million results. They are timeless". [3] In 2022, Bank of America wrote to their clients saying: "You can't change human nature and Mr. Farrell's rules seem as relevant today as when he retired from Merrill Lynch 20 years ago". [2] Farrell's rules are not only used on Wall Street, in 2020, India's The Economic Times said: "Although Farrell retired long back, his years of wisdom summarized in his famous book, titled 10 Market Rules to Remember, has lived on and is always referred to when investors get into difficult market situations". [12]

See also

Related Research Articles

In finance, technical analysis is an analysis methodology for analysing and forecasting the direction of prices through the study of past market data, primarily price and volume. As a type of active management, it stands in contradiction to much of modern portfolio theory. The efficacy of technical analysis is disputed by the efficient-market hypothesis, which states that stock market prices are essentially unpredictable, and research on whether technical analysis offers any benefit has produced mixed results. It is distinguished from fundamental analysis, which considers a company's financial statements, health, and the overall state of the market and economy.

<span class="mw-page-title-main">Investment banking</span> Type of financial services company

Investment banking pertains to certain activities of a financial services company or a corporate division that consist in advisory-based financial transactions on behalf of individuals, corporations, and governments. Traditionally associated with corporate finance, such a bank might assist in raising financial capital by underwriting or acting as the client's agent in the issuance of debt or equity securities. An investment bank may also assist companies involved in mergers and acquisitions (M&A) and provide ancillary services such as market making, trading of derivatives and equity securities, FICC services or research. Most investment banks maintain prime brokerage and asset management departments in conjunction with their investment research businesses. As an industry, it is broken up into the Bulge Bracket, Middle Market, and boutique market.

A financial analyst is a professional, undertaking financial analysis for external or internal clients as a core feature of the job. The role may specifically be titled securities analyst, research analyst, equity analyst, investment analyst, or ratings analyst. The job title is a broad one: in banking, and industry more generally, various other analyst-roles cover financial management and (credit) risk management, as opposed to focusing on investments and valuation; these are also discussed in this article.

<span class="mw-page-title-main">Henry Blodget</span> American businessman, investor and journalist

Henry McKelvey Blodget is an American businessman, investor and journalist. He is notable for his former career as an equity research analyst who was senior Internet analyst for CIBC Oppenheimer and the head of the global Internet research team at Merrill Lynch during the dot-com era. Blodget was charged with civil securities fraud by the U.S. Securities and Exchange Commission and settled the charges. Blodget is the co-founder and former CEO of Business Insider.

The Fidelity Magellan Fund is a U.S.-domiciled mutual fund from the Fidelity family of funds. It is perhaps the world's best-known actively managed mutual fund, known particularly for its record-setting growth under the management of Peter Lynch from 1977 to 1990. On January 14, 2008, Fidelity announced that the fund would open to new investors for the first time in over a decade.

Elaine M. Garzarelli is an American financial analyst.

<span class="mw-page-title-main">Merrill Lynch & Co.</span> Defunct American investment bank

Merrill Lynch & Co., formally Merrill Lynch, Pierce, Fenner & Smith Incorporated, was a publicly-traded American investment bank that existed independently from 1914 until January 2009 before being acquired by Bank of America and rolled into BofA Securities.

Sell side is a term used in the financial services industry to mean providing services to sell securities. Firms or institutions on this side include investment banks, brokerages and market makers, who facilitate offering securities to investors, conducting research and creating financial products.

<span class="mw-page-title-main">FactSet</span> American financial data company

FactSet Research Systems Inc., trading as FactSet, is an American financial data and software company headquartered in Norwalk, Connecticut, United States. The company provides integrated data and software. For fiscal year 2023, FactSet's total ASV and professional services revenues were $2.09 billion. FactSet's total market value is approximately $15 billion.n

Robert R. Prechter Jr. is an American financial author, and stock market analyst, known for his financial forecasts using the Elliott Wave Principle. Prechter is an author and co-author of 14 books, and editor of 2 books, and his book Conquer the Crash was a New York Times bestseller in 2002. He also has published monthly financial commentary in the newsletter The Elliott Wave Theorist since 1979, and is the founder of Elliott Wave International and New Classics Library. Prechter served on the board of the CMT Association for nine years, and as its president in 1990–91. He has been a member of Mensa and Intertel. In recent years Prechter has supported the study of socionomics, a theory about human social behavior.

<span class="mw-page-title-main">CMT Association</span>

The CMT Association is a non-profit, global, professional organization of technical analysts headquartered in New York City, servicing over 4,500 market analysis professionals in around 137 countries. The CMT Association is a global credentialing body with nearly 50 years of service to the financial industry. The CMT Association certifies that an individual is competent in the use of technical analysis via the Chartered Market Technician (CMT) designation.

Robert Farrell may refer to:

Heather Miller is an American businesswoman. She is a private investor, former Wall Street securities analyst. She served as a Congressional appointed commissioner on the Financial Crisis Inquiry Commission in 2009 and the President's Commission on Enhancing National Cybersecurity in 2016.

John J. Murphy is an American financial market analyst, and is considered a proponent of inter-market technical analysis, a field pioneered by Michael E.S. Gayed in his 1990 book. He has authored several books including Technical Analysis of the Futures Markets. He later revised and broadened this book into Technical Analysis of the Financial Markets.

Merrill, previously branded Merrill Lynch, is an American investment management and wealth management division of Bank of America. Along with BofA Securities, the investment banking arm, both firms engage in prime brokerage and broker-dealer activities. The firm is headquartered in New York City, and once occupied the entire 34 stories of 250 Vesey Street, part of the Brookfield Place complex in Manhattan. Merrill employs over 14,000 financial advisors and manages $2.8 trillion in client assets. The company also operates Merrill Edge, a division for investment and related services, including call center counsultancy.

<span class="mw-page-title-main">Merrill Edge</span> Electronic trading platform provided by BofA Securities

Merrill Edge is an electronic trading platform and investment advisory service that provides self-directed and guided investment options for individuals and businesses. It is a subsidiary of Bank of America and was launched in 2010 after the merger between Merrill Lynch and Bank of America. Merrill Edge offers a wide range of investment products, including stocks, bonds, exchange-traded funds (ETFs), margin lending, mutual funds, and options.

David Woo is the CEO of David Woo Unbound, a global forum devoted to the promotion of fact-based debates about markets, politics, and economics. Woo was previously the Head of Global Interest Rates, Foreign Exchange, Emerging Market Fixed Income & Economics Research at Bank of America, where he researched the world financial markets. Woo is known for his contrarian calls on the 2016 United States elections, the 2015 devaluation of the renminbi, Bitcoin, and the future of the Euro. He was voted as one of the twelve smartest people on Wall Street in 2013 by Business Insider.

R. Conrad Leslie Jr. was an American businessman and crop forecaster, described by The New York Times as "the nation's leading private harvest forecaster". His monthly corn, soybean, and wheat production estimates were very influential, and his opinions were well-regarded by various news outlets. The majority of interest in his daily price interpretations and daily market observations came from brokers and their clients such as Thomson McKinnon and ADM Investors Services. He died in December 2018 at the age of 95.

Nathan E. "Ned" Davis, is an American financial analyst, finance author, and co-founder of the Ned Davis Research Group (NDRG), a data-driven investment research company based in Venice, Florida.

<span class="mw-page-title-main">Citadel Securities</span> American market making firm

Citadel Securities LLC is an American market making firm headquartered in Miami. It is one of the largest market makers in the world, and is active in more than 50 countries. It is the largest designated market maker on the New York Stock Exchange. Citadel Securities is a separate entity from the hedge fund Citadel LLC, although both were founded and are majority owned by American hedge fund manager Kenneth C. Griffin. Citadel Securities is expected to eventually move its headquarters from Chicago to Miami, having bought land there to build its new headquarters.

References

  1. ↑ Burton, Jonathan (14 May 2022). "This Wall Street legend has lived through every bear market since the 1950s. He says the one coming could hit the S&P 500 with a 30% loss". MarketWatch . Retrieved 3 June 2023.
  2. 1 2 3 4 5 Fox, Matthew (29 May 2022). "A Wall Street legend's 10 market rules are still relevant decades later as stocks buckle under soaring inflation and higher interest rates, Bank of America says". Business Insider . Retrieved 3 June 2023.
  3. 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 Behnfield, Douglas (23 September 2021). "Thoughts on Bob Farrell's Market Rules to Remember" (PDF). Morgan Stanley . Retrieved 3 June 2023.
  4. 1 2 3 4 5 6 7 8 9 10 11 12 13 14 Fitzgerald, Maggie (11 February 2020). "This Wall Street legend's 10 rules for investing are very applicable to today's bull market". CNBC . Retrieved 2 June 2023.
  5. 1 2 Barlow, Scott (3 June 2022). "These 10 timeless investing rules offer guidance for today's markets". Globe & Mail . Retrieved 3 June 2023.
  6. 1 2 Denmark, Francis (13 October 2011). "Hall of Fame 20 - Robert Farrell". Institutional Investor . Retrieved 4 June 2023.
  7. 1 2 3 4 5 Sweeney, John (July 2001). "Tracking The Trends Of Technical Analysis: Bob Farrell". Technical Analysis of Stocks & Commodities . 19 (7). Retrieved 4 June 2023.
  8. 1 2 3 "Robert J. "Bob" Farrell, First President CMT Association". CMT Association . 2023. Retrieved 4 June 2023.
  9. 1 2 3 "Merrill's Legendary Analyst Is Leaving After 25 Years". New York Times . 19 December 1992. Retrieved 2 June 2023.
  10. 1 2 3 Hebberline, Greg (22 September 1996). "Esteemed Market Guru Is One Of A Kind". The Seattle Times . Retrieved 5 June 2023.
  11. ↑ Burton, Jonathan (11 June 2008). "Learn a lesson -- before you get one". MarketWatch . Retrieved 4 June 2023.
  12. ↑ Nagar, Anupam (24 October 2020). "Bob Farrell's 10 thumb rules to deal with market uncertainties". The Economic Times . Retrieved 3 June 2023.
This page is based on this Wikipedia article
Text is available under the CC BY-SA 4.0 license; additional terms may apply.
Images, videos and audio are available under their respective licenses.