Published 2000, Update 26-October-2012
Gerald M. Loeb (1935, print 1965) "The Battle For Investment Survival" , Fraser Publishing Com. p. 13, 40, respectively.
"Knowledge born from actual experience is the answer to why one profits; lack of it is the reason one loses."
"Over-diversification acts as a poor protection against lack of knowledge."
Benjamin Graham (1949, print 2005 with Foreword by Bogle) "The Intelligent Investor" , Harper Business.
"If you speculate you will (most probably) lose your money in the end." p. xxiv.
"Intelligent investment is more a matter of mental approach than it is of technique." p. 21.
"To achieve satisfactory investment results is easier than most people realize; to achieve superior results is harder than it looks." p. 250.
'Adam Smith' (George Goodman) (1968) "The Money Game", Michael Joseph, London. p. 117.
"If you don't know who you are, this is an expensive place to find out."
"Markets go in cycles like all the other rhythms of life."
"Adam Smith' (George Goodman) (1975) "Powers Of Mind", Random House N.Y..
"...They would say they were right and the market was wrong because their reasons were right.
If you're stubborn, you can lose a fortune with causality and plain logic." p. 72.
Jane Bryant Quinn (1991) "Making the Most of Your Money", p. 671. Simon & Schuster.
"Never to buy anything whose price you can't follow in the newspapers."
Zweig Jason (2007) "Your Money and Your Brain", Simon & Schuster, p. 32.
"Stocks are like Weather, altering almost continuously and without warning; businesses are like climate, changing much more gradually and predictably."
Globalization + Computerization = Tzunamization. (added October 2008)
If you don't know the 'Game', here is an inexpensive site to find out.
* Keep your nerves steady as the nerves are the most important part of your body, when it comes to the Game.
* The Game has rules - patterns, graphs, math. formulas, logic, psychology and chance - but no one knows what they are for sure.
So you are free to choose your own strategy. Your personality will dictate it for you.
* Everybody has his own mix of profit-loving and risk-hating.
The methods are not competitive but complementary and each method is useful in its own time.
* Cyclic Analysis (Dow, Elliot, Fibonacci, Gann, Hurst and Speculative Cycles) are the tools to find the timing and the pricing of the market.
* Fundamentals Analysis is the way to identify countries, sectors, branches, and groups to invest in.
* Security Analysis is the method to identify the stocks that are under or over valued (good or bad buying).
* Technical Analysis is the way, in the short run, to find the good/bad, buy/sell, price.
►If you don't believe in the predictability of the market, or have no time to manage your portfolio, buy Index Funds or Bonds.
I will explain here only the Speculative Cycles which I have developed. The other methods are explained in the books listed in the bibliographic list or you can use Google, Britannica and Wikipedia.
The Speculative Cycles:
Theory - The Sleeve (Pipe, Cylinder) and The Stock Market
The Speculative Indexes of the stock markets behave like water flowing through a sleeve (pipe).
Assumption: The mathematical root of the speculative stock markets is the 'sleeve (pipe) model', see Ben Tamari (1990) "Foundations of Economics," p. 47, Fig. 3.
Conjecture: The mathematical basis of the stock market is Pappus's theorem, or Pascal's Theorem. (see Weisstein. "Pappus's Hexagon Theorem").
Fig. 1: Application of Pappus (Hexagon) Theorem on The Speculative Cycle of Tel Aviv Stock Exchange.
Empiric - The Sleeve (Pipe, Cylinder) and The Stock Market
McNeel R. W. (1921) "Beating The Stock Market", p. 50, Cosimo Inc.
"The complete cycle, occupying two or three years, has represented the transfer of stocks from the public to intelligent interests at low prices, the retransfer to the public at high prices, and the return of those stocks to the intelligent interests at low prices again. So the intelligent speculators are stronger. They have the stocks as well as the public's money, and the poor old public, the lambs (my bold BT), must go out and grow a new fleece."
Graham Benjamin (2006) "The Intelligent Investor", Revised Edition, Updated with New Commentary by Jason Zweig, Collins.
"Since common stocks, even of investment grade, are subject to recurrent and wide fluctuations in their prices, the intelligent investor should be interested in the possibilities of profiting from these pendulum swings (my bold B.T.). There are two possible ways by which he may try to do this: the way of timing and the way of pricing. By timing we mean the endeavor to anticipate the action of the stock market - to buy or hold when the future course is deemed to be upward, to sell or refrain from buying when the course is downward. By pricing we mean the endeavor to buy stocks when they are quoted below their fair value and to sell them when they rise above such value." p. 189.
"The most realistic distinction between the investor and the speculator is found in their attitude toward stock-market movements. The speculator's primary interest lies in anticipating and profiting from market fluctuations. The investor's primary interest lies in acquiring and holding suitable securities at suitable prices. p. 205."
►The Speculative Cycles will assist you not to be a lamb but to detect the timing and pricing of the Market within the cycle.
For example: Fig. 2: Dow-Jones Industrial Average 1897-1947
U Fig. 3: The Speculative Index vs Volume, New York Stock Exchange 1960 - 2012.
U Fig. 4,5,6,7,8,9: The Speculative Cycles of Hong Kong, London, New York, Tel Aviv, Tokyo and Toronto Stock Exchanges.
U Fig. 10: The Speculative Cycles of London, New York, Tel Aviv and Tokyo Stock Exchanges Together.
Note 1, 15-Februar-2007 A Note On Patterns
Zweig Jason (2007) "Your Money and Your Brain", Simon & Schuster.
"The Pursuit of patterns in random data is a fundamental function in our brains -- ... ." p. 58.
Mandelbrot and Hudson (2004) "The (Mis) Behavior of Markets.", p. 21, Basic Books.
"Patterns are the fool's gold of financial markets. The Power of chance suffices to create spurious patterns and pseudo-cycles that, for all the world, appear predictable and bankable. But a financial market is especially prone to such statistical mirages. My mathematical models can generate charts that - purely by the operation of random processes - appear to trend and cycle. They would fool any professional "chartist." Likewise, bubbles and crashes are inherent to markets. They are the inevitable consequence of the human need to find patterns in the patternless."
Mantegna and Stanly (2000) "An Introduction To Econophysics: Correlations and Complexity in Finance.", p. 5, Cambridge.
"Although it cannot be ruled out that financial markets follow chaotic dynamics, we choose to work within a paradigm that asserts price dynamics are stochastic processes. Our choice is motivated by the observation that the time evolution of an asset price depends on all the information affecting (or believed to be affecting) the investigated asset and it seems unlikely to us that all this information can be essentially described by a small number of nonlinear deterministic equations."
Here are two quotations that stand out against the ability to predict the market, since there are no patterns or equations found in stocks markets prices. My opinion is different as I believe that if we have enough information on the market it will reveal the patterns or equations hidden behind it. We need at least 10 cycles of reliable data. Since on the average one cycle lasts 10 years, we need at least 100 years of data. So far we have only 51 years of reliable data (since 1960).
In the words of Nikolai D. Kondratieff (1950) "The Long Waves In Economic Life" in "Readings in Business Cycle Theory" , American Economic Association Series, p. 34.
"Although the period embraced by the data is sufficient to decide the question of the existence of long waves, it is not enough to enable us to assert beyond doubt the cyclical character of those waves. Nevertheless we believe that the available data are sufficient to declare this cyclical character to be very probable."
In the words of Norbert Wiener (1954) The Human Use of Human Beings" p. 21., Da Capo Press.
"Messages are themselves a form of pattern and organization."
In the words of Sunny Y. Auyang (1998) Foundations of Complex-System Theories In Economics, Evolutionary Biology, and Statistical Physics. p. 2. Cambridge UP.
"One cannot see the patterns of a mural with his nose on the wall; he must step back
Note 2, 15-January-2008 A Note On "to Predict the Unpredictable."
Zweig Jason (2007) "Your Money and Your Brain", Simon & Schuster.
"No one can predict the unpredictable". p. 56,
"Just as nature abhors a vacuum, people hate randomness., ... , I call this human tendency 'the prediction addiction'." p. 65.
but he made 'the predictable unpredictable'.
Wislawa Szymborska (1996) "Ending and Beginning"translated by Deena Land (11-August-2010)
"Maybe All This
The changes are self occurring?
According to plan?
The graph needle slowly draws
The foreseen zigzags?"
Take a look at the two pictures: The first is the Jordan river and the second is the "Speculative Stock Index vs. Volume Trade", from the point of view of predictability: what is the difference ?
'Adam Smith' (1968) "The Money Game", Michael Joseph, London.
'Adam Smith' (1972) "Supermoney", Michael Joseph, London.
American Economic Association Series (1950) "Readings in Business Cycle Theory" .
Chorafas D. N. (1994) "Chaos Theory in the Financial Markets", IRWIN.
Campbell, Lo and Mackinlay (1997) "The Econometrics of Financial Markets", Princeton UP.
Dewey E. R. and Dakin E. F. (1947) "Cycles: The Science Of Prediction", Henry Holt and Company, NY.
Dua P. (Editor) (2004) "Business Cycles and Economic Growth", Oxford UP.
Fosback N. G. (1976) "Stock Market Logic", Dearborn Financial Pub. Inc.
Graham B. (1949) "The Intelligent Investor" , (print 2005 with Foreword by Bogle) Harper Business.
Graham B. (2006) "The Intelligent Investor", Revised Edition, Updated with New Commentary by Jason Zweig, Collins.
Graham B. and DoddL. D. (1951) "Security Analysis" McGraw-Hill.
Hansen A. (1951) "Business Cycles and National Income", Norton, NY.
Hurst J. M. (1970) "The Profit Magic of Stock Transaction Timing", Traders Press.
Hurst J. M. (1974) "Cyclic Analysis", Traders Press.
Loeb G. M. (1935 print 1965) "The Battle For Investment Survival ", Fraser Publishing Company.
Malkiel B. G. (2003) "A Random Walk Down Wall Street: Completely Revised and Updated Edition", Norton & Co.
Mandelbrot B. B. and Hudson R. L. (2004) "The (Mis) Behavior Of Markets", Basic Books.
Mantegna and Stanly (2000)"An Introduction To Econophysics: Correlations and Complexity in Finance.", Cambridge.
McNeel R. W. (1921) "Beating The Stock Market", Cosimo Inc.
Medio in Collaboration with Gallo (1992) "Chaotic Dynamics - Theory and Applications to Economics", Cambridge University Press.
Millard B. J. (1999) "Channels & Cycles: A Tribute To J. M. Hurst", Traders Press, Inc.
Murphy J. J. (1986) "Technical Analysis of the Futures Markets", New York Institute of Finance.
Murphy J. J. (1999) "Technical Analysis of the Financial Markets", New York Institute of Finance.
Pesavento L. (1999) "Profitable Patterns for Stock Trading", Traders Press.
Peters E. E. (1991) "Chaos And Order In The Capital Markets", John Wiley & sons, Inc.
Puu T. (1991) "Nonlinear Economic Dynamics", 2ed., Springer-Verlag.
Puu T. and Sushko I. (Editors) (2006) "Business Cycle Dynamics", Springer.
Quinn J. B. (1991) "Making the Most of Your Money"Simon & Schuster.
Ravi B. (1985) "The Great Depression Of 1990", Simon and Schuster, NY.
Rosser J. B. (1991) "From Catastrophe to Chaos: A General Theory of Economics Discontinuities", Kluwer Academic Publishers.
Schumpeter A. J. (1939) "Business Cycles", McGraw-Hill, NY.
Siegel, Shimae, Qureshi & Brauchler (2000) "International Encyclopedia of Technical Analysis", Glen lake Pub..
Silver N. (2012) "The Signal and the Noise: why so many predictions fall - but some don't", The Penguin Press.
Sornette D. (2002) "Why Stock Markets Crash", Princeton University Press.
Voit J. (2005) "The Statistical Mechanics of Financial Markets", 3ed., Spriger.
Zweig J. (2007) "Your Money and Your Brain", Simon & Schuster.
http://www.kwaves.com/kond_overview.htm (Kondratieff Theory)
http://www.fractalfinance.com/index.html (Fractal Finance)
http://www.gold-eagle.com/editorials_99/mbutler120299b.html (Elliott Wave Theory)
http://trading-stocks.netfirms.com/elliot-wave.htm (Elliott Wave Theory)
http://en.wikipedia.org/wiki/Benjamin_Graham (Benjamin Graham)