Marty Schwartz: is the stock market bottom fishing or kitesurfing?
Bottom fishing in the markets: buying whatever has fallen a lot because “it’s cheap and it can’t go any lower”. Kitesurfing: buying strength, quality, momentum.
Which of the two makes money?
Don’t buy poor quality cheap — buy quality, even when it’s expensive. “Bottom fishing” rests on three illusions: a low price is not a floor price, oversold conditions can last longer than your capital, and a low P/E signals a company judged to be weaker, not an undervalued stock.
What is bottom fishing in the stock market?
Bottom fishing means buying a stock because it has fallen sharply, betting on a bounce. It takes three common forms, each based on appealing but false reasoning:
| Form | The reasoning | Why it’s wrong |
|---|---|---|
| Based on price | “It has fallen so much it can’t go any lower” | The floor price of a stock is €0 — bankruptcy |
| Based on an indicator | “The RSI is oversold, it’s going to bounce” | An asset can stay oversold longer than your account can hold out |
| Based on the P/E | “P/E of 6, the stock is undervalued” | A low P/E reflects low perceived quality, not a discount |
Bottom fishing — the 3 most common forms
1. Based on price
“It has fallen so much, it’s cheap, it can’t go any lower.”
You are not buying an iPhone. This is not a case of the cheaper it is, the better the deal.
The minimum price of a share is €0. Bankruptcy. And a support level is only a potential bounce zone — made to be broken one day or another.
2. Based on a technical indicator: RSI or Stochastic oversold
A serious beginner’s mistake: oversold doesn’t exist.
A stock can stay in oversold territory longer than your bank account can survive. The RSI can rise while the price of the stock keeps falling.
3. Based on fundamental analysis: the low P/E
The P/E ratio is only an indicator of the quality of a company as perceived by the market.
If nobody is willing to pay more than 6 times annual earnings for the stock, it’s because they think it isn’t worth more. A low P/E does not mean the stock is undervalued — it means it is judged worse than its competitors. Full stop.
Marty Schwartz’s advice
Don’t buy poor quality cheap. Buy good quality expensive.
Why do more people spend €1,000 on an iPhone rather than €100 on a Wiko?
Because perceived quality justifies the price. The same is true in the markets:
- Buy the stocks breaking their highs (as Tesla did in its day)
- Buy the stocks whose indicators are strong, not the ones sinking
- It works for all your investments too: always go for quality
Strength attracts strength. You don’t beat the market by buying what everyone is fleeing — you beat it by buying what informed investors are already buying.