Definitions
- Boards of Directors. A hold
over from class societies. Although there are exceptions, do not believe
that directors are watching out for shareholder interests. Many people
serve on boards for selfish purposes. Selfishness is okay as long as it
is not coupled with dishonesty, deceit, stupidity, or laziness. And most board members have no
understanding of the process they are supposedly overseeing. (Scroll
down to see
Cronyism).
- Bubble Markets. These are fun.
Get in near the lows and sell near the highs. Buy put options or write
call options during the down cycles and buy call options and write put
options during the up cycles. Or simply buy low and sell high. The
Indicant beats buy and hold. That is its purpose. A 30-year old investor
in October 1929 was over 65 years old before his late 1929 investments
were back to break-even and six foot under when discounting for
inflation.
- Convergence. This is when
different sectors or indexes are all moving in the same direction and
with similar magnitude. During convergent bulls, everyone makes paper
money. There is no such thing as convergent bears. There is always a
bullish sector, stock, or fund. (Opposite of divergence).
- Commonality Phenomenon. Any
investment advisory successfully marketed to the masses will ultimately
fail. Why? Because too many people will be doing the same thing at the
same time. Even though bulls require participation from the crowd, the crowd is always wrong.
The "crowd" consists of followers. The winners typically do the opposite
of the crowd. Capitalistic methods require winners and losers. That is
the nature of that system and there is no better system, as capitalism
is closely aligned with the laws of nature. Another way to understand
this is to
plot a single series of random numbers on graph paper. It looks like
cardiac arrests. Take a second set of random numbers and add them to the
first set. A plot of the two set of numbers will not be as volatile. A
third set of random numbers added to the first two sets will produce a
flatter line. If you keep doing this, you will ultimately find a
straight line. The Indicant has limited membership. We don't want our
members paralleling the behavior of the "crowd." We defeat the crowd.
That is the way the system works. Why should be editor and staff of the
Indicant be loyal to the masses? We are only loyal to our members, who
have expressed confidence in our models.
-
Commonality Threshold. The market always starts its decline just
as nearly every potential investor is finally "into" the market. The
market always starts its bullish incline when very few potential
investors are into the market. These cycles last from three to five
years, but with occasionally significant variations . More than one-half of all stock market participants lose money
because of the nature of their participation. This is why the market
consistently demonstrates bull and bear cycles.
- Cronyism. Many generations of
management teams in older corporations increase the likelihood of practicing
cronyism. It is okay if the cronies are competent, but all too often,
they are not. It is interesting to note that General Motors Board of
Directors recognized this in the early 1990's and dumped most of their
parts manufacturing operations to the public and fired most of the "good
o'l boy network." The company has benefited
since then. This is obviously an exception to bad boards. Unfortunately,
GM started its death spiral shortly after the retirement of its great
leader, Alfred P. Sloan. The death spiral continues and it will be
immoral and weaken the great U.S. economy if the government intervenes
in saving General Motors. Enron was not
an exception. It had a board consisting of the all four components of
failure; deceit, dishonesty, laziness, and stupidity. (See Board of Directors).
- Decisions. They are simple and
only four to remember. Buy, Hold, Sell, Avoid. The Indicant advises of
these four decisions every weekend for the Mid-term Indicant and daily
for the Quick-term and
Short-term Indicant models.
- Dilettante Management. Managers
who lead what they never did. A person wearing cowboy hat and boots all
the time, who never rode a horse, bull, or roped a calf.
- Direction of Stocks, Funds, and
Markets. Who cares about magnitude? The direction is all that is
important. If it is going up, you want to participate. Estimates of 10%,
20%, or even 50% bulls are wasted energy. Who cares how much! Up or down
is the only salient point here. The Indicant identifies direction. (See
Magnitude)
- Divergence. This is when some
sectors are more bullish than others or when some sectors are bullish
and others are bearish. (Opposite of convergence).
- Economic Wealth. Wealth is
delivered by three and only three value streams. 1) Manufacturing. 2)
Agriculture, 3) Extraction. All other forms of economic existence live
off these three.
- Forecast. A specific numerical
forecast will have error over 99% of the time. And the further into the
future the forecast is, the more error it has. This is not an opinion,
but a statement of fact.
- Magnitude. This is how much the
market, stock, or fund goes up or down. It is impossible to consistently
predict magnitude. Just focus on direction. (See Direction of Stocks,
Funds, and Markets).
- Market Classifications. The
Indicant advises of bull or bear. It has four unique ways of doing this.
(See FAQ's).
- MBS (Management by Stupidity).
Many companies are led by incompetent management teams. Over half of
mutual funds fail. A successful company can be ruined rapidly with
management stupidity. Fortune500 membership life cycles are getting
shorter. That is because of the high influx of dilettante managers who
are employed during the cycle of successful enjoyment, as opposed to
those who build from scratch. Excessive focus on academic credentialism
and cronyism accelerate the demise of Fortune500 companies.
- Indicant Models. 1) The
Quick-term Indicant tracks the market every day. If you want hourly or
real time tracking, go elsewhere. We want our members to also have a
life and not lose money. 2) The Short-term Indicant also tracks the
market daily, but signals bull or bear with much less frequency. Click
here to see Indicant historical performance. 3) The Mid-term Indicant
is a weekly update for stocks, funds, and markets. 4) The Long-term
Indicant is updated monthly.
- Option
Stalking. Most day traders and other investing radicals lose
money. That is because they chase a moving target. A shot-gun could work
for them, but unfortunately, the target requires a bullet and most
cannot hit the target. Stalking an option is analogized to successful
carnivores in the wild. They stalk first and then pounce. See the
Quick-term Indicant guide for more details on options opportunities
and click
here for options stalking.
-
Politician's Influence on Stock
Market. Their only influence can be negative. It is impossible for
them to provide a positive (bullish) influence. Why? Henry Ford, Thomas
Edison, Soichira Honda, Alfred P. Sloan, Earle P. Halliburton and thousands of others built the world economy.
Politicians did not build the economy. Anyone who does not live within a
budget and whose performance is not tied that budget will not perform
well. Anyone who does not compete on a daily basis will not perform well.
Politicians only method of competing is negatively talking down their
opponent or claiming they a better than others, including you.
- Sector Investing. There is
always some sector diverging bullishly or bearishly from the rest of the
market. The Indicant stocks and funds cross several sectors. (See
Convergence and Divergence)
- Selfishness. This is good. It,
along with greed, is what causes the stock market to not stay flat for
long periods of time. The greater the market volatility, the better the
Indicant performs.
- Stalking Options. Scroll up to
Option Stalking.
Click here for tour.
- Stock Value. Although many
analysts and brokerage houses convey what a stock ought to be worth,
their hot air is always superseded by the reality of the actual stock
price.
- Trust. You cannot trust
security analysts, investment bankers, public accounting firms, several
company management teams, many fund managers, boards of directors, and
nearly all politicians. Who then can you trust? Look in the mirror. The
Indicant will be happy to help, but only a few of you.
-
Voodoo Bookkeeping. The 1990's NASDAQ bubble produced pressure on
non NASDAQ companies to heighten the performance of their stock prices.
So, rather than working harder and smarter, some companies chose to insert
bogus numbers into their financial reports. Never pay for
fictional literature, as fiction should be free. Simple bookkeeping should be
re-employed for the sake of the equity markets.
