Wikipedia defines Q.E.D. as an initialization of the Latin phrase quod erat demonstrandum, originating from the Ancient Greek, meaning “that which had to be proven.”  Perhaps a better translation would read, “The very thing it was required to have shown.”

Why is this important to investors?

With the ever expanding volume of financial news, there has been a corresponding increase in a variety of studies, forecasts and other communications that present a broad range of opinions and conclusions.  Question, does the author have an axe to grind?  In many cases, it seems as though authors have a predetermined position, and have tailored their commentary to fit the desired conclusion.

Investors should be careful to assess the motives and assumptions incorporated in this flood of information.  It is important to understand the authors’ backgrounds and previous positions, the sources and objectives of the advocates of specific recommendations and, of course, who, if anyone, paid for the study.  Some commentary has a clear political agenda.  Some studies have corporate sponsors.

The bottom line is, before acting, understand the background.  This may be difficult for individuals, which suggests that it may be appropriate to sometimes draw on the greater experience and resources of your advisor(s).

All comments and suggestions are welcome.

Walter J. Kirchberger, CFA®