A pointed rant from The Zikomo Letter on the value of fundamental data:
All fundamental data is wrong in some way. Some of it is incorrect, some of it is published by people with a vested interest, and some of it is lies. I am not angry about it, but I think we should face the sometimes harsh reality provided by the Red Pill.
Let us start with company-provided information. If the history of public corporations tells you anything, it is that anything a corporation tells you should be treated as a lie. Sometimes it is deliberately misleading, sometimes it obscures the truth, and sometimes it just lies to your face. If you do not believe me, then I point you to some of those who were caught: Enron and Lehman Bros stick in the mind, but the list is long.
Do not kid yourself that these are the rogues in an otherwise healthy bunch: every public corporation twists and tortures their information to meet their objectives. In a previous life I was a company auditor, and I can attest that there is plenty of scope for maneuver within the law.
Technicians have long looked at fundamental data with healthy suspicion. To be clear, I am not saying that fundamental data is useless. I am sure some are able to use it to their benefit. However, the risk of the “garbage in garbage out” problem with fundamental data is high. One of the great things about relative strength is that it largely avoids this problem by simply reacting to what is happening in the market as opposed to what we are being told is happening.
HT: Abnormal Returns