Wednesday, November 12, 2008

Investing: "Throwing Out the Rule Book" (The best Performing Investment Letter is by an Astrologer)


"The fault, dear Brutus, is not in our stars,
But in ourselves, that we are underlings."

Julius Caesar (I, ii, 140-141)
Just a reminder, we have taken as our lodestone, a cartoon:
...So we can look for a bounce but think of these names as a trade; bear markets can suck you in. When I first came to the market, one of the older traders told me he was saved in the '73-'74 bear by a cartoon:
(click to enlarge)

That's Alfred Frueh's January 16, 1932 New Yorker classic, "Just around the Corner", commenting on President Hoover's statement that "Prosperity is just around the corner".

From MarketBeat:

Throw out the stock charts and the conventional wisdom and accept that any short-term trade is nothing but a shot in the dark. The 2008 stock market is the most volatile since 1933, and it has rendered the use of data and trading experience to predict performance futile.

“Frankly, we don’t know,” said Cleve Rueckert, a technical analyst at Birinyi Associates, in a note to clients. “Anyone who claims to have some insight or strategy cannot do so on the basis of fact or historical evidence. To us the market today is like the common cold…the best (and only) remedy is time.”...

...In an attempt to debunk “the capitulation myth,” Mr. Rueckert, of Birinyi Associates, found an item in the New York Times three days after the bottom of the 1982 bear market that promised the end would take the form of a “crushing…swift plunge.” According to his analysis, bear markets usually end with a whimper rather than a bang.

To date, the best predictor of a market turn was probably an email that circulated among Wall Street traders on Oct. 27, the day of the interim bottom. The analysis was based on lunar cycles, a cornerstone of astrology....MORE

The email referenced nailed the then bottom, immediately before a 1450 (17.7%) point up move for the DJIA (8175 close, Oct. 27 to 9625 Nov. 4.) From our post "Is The Financial Crisis Making You Psychic?":

Last week MarketBeat posted "Written in the Stars" wherein somebody I've never heard of says the market would bottom today:

...Panic lows have historically occurred on day 27/28 of the 7th lunar cycle, which are this Sunday and Monday. The panics of 1857/1907/1929/1987/1997 all marked their lows on these days in October!”...

On November 9, MarketWatch told us of a different star:

Star performer relies on the stars

Commentary: Crawford uses astrology to compile year's best record to date

The top-performing letter for this terrible year to date is an astrologer. It figures.

Or maybe it doesn't figure. I remember having a huge hassle with Barron's great editor, Alan Abelson, way back in the early 1980s, about whether I should report a conference at which the 2008 top performer, Arch Crawford of Crawford Perspectives, was to speak.
Alan's view: It was hogwash. My view: Who cared? It was interesting. (By the way: As a good liberal, Alan conceded.)

Now, of course, I would point to the Hulbert Financial Digest ratings. Never mind the system, feel the results.
But Arch Crawford provided a different rationale. Astrology conferences, he said, were great places to meet girls.
Which, I guess, was valuable investment advice.
You got a problem with that?
Over the year to date through October, Crawford Perspectives is up a breathtaking 36% by Hulbert Financial Digest count, vs. negative 32.94% for the dividend-reinvested Dow Jones Wilshire 5000....MORE